SHINSEI-AOZORA/SHARESHave two big Japanese lenders, backed by private equity, found a way to come up with a sensible merger plan? A merger between Shinsei Bank, nearly a third-owned by JC Flowers, and Aozora Bank, more than half-owned by Cerberus, is reported back on track after the Western firms cooled their jets on the deal last month, saying there was no strategic plan behind the tie-up.

Shares of both institutions have been on a tear since talk of a merger bubbled up last month, but are mere shadows of what they were earlier in the decade after their sale to private equity marked a fresh stab at rehabilitation in the Japanese banking industry. Just about the only thing going obviously well for the investments right now, aside from the merger bump, is the strength of the yen.

The banks plan to set up a holding firm in 2010 and merge a year or so later, the Nikkei Business Daily reported. JC Flowers and Cerberus will probably remain shareholders in the holding firm, according to the report, so this wouldn’t be a big cash-out for either.

Pooling their expertise make sense in Japan, where foreign ownership of local institutions has had a history of causing more friction than warmth. Analysts say the merged bank — which would be Japan’s sixth-biggest — would still need government money and face a huge challenge to win over depositors from the country’s megabanks.

Deals of the Day:

* A consortium of 11 banks and interdealer broker ICAP has bid 813 million euros ($1.07 billion) for LCH.Clearnet, Europe’s top independent clearing house, a source close to the consortium said.