(March 24): Sumitomo Mitsui Financial Group Inc has no immediate plan to take over Jefferies Financial Group Inc, according to people with direct knowledge of the matter, after a media report of a potential deal.
Japan’s second-biggest lender isn’t engaged in such talks with the Wall Street lender, the people said, asking not to be identified discussing private information. Executives at SMFG are conscious of various obstacles to any moves to further integrate Jefferies, including regulatory hurdles, they said.
The Financial Times, citing people it didn’t name, reported earlier that the Tokyo-based bank is working on plans for a possible acquisition and has set up a small team that will be ready to act if Jefferies’ falling share price presents an opportunity. Any such move isn’t imminent and would have to overcome many stumbling blocks, the newspaper said.
A spokesperson for SMFG said Jefferies is an “important partner,” adding the lender won’t comment on “hypothetical assumptions or rumors.” Representatives for New York-based Jefferies didn’t respond to requests for comment.
Shares of Jefferies, which have tumbled 36% this year, rose as much as 14% in pre-market trading on Tuesday following the FT report. The stock has been hit by various troubles, including its exposure to collapsed firms like First Brands Group and Market Financial Solutions Ltd.
SMFG reached a deal in September that would allow it stay under a 5% regulatory threshold for voting interest in Jefferies while building a stake of as much as 20%. That was up from a 15% holding. A potential takeover will build on a multi-year pact that has enabled Jefferies to access more capital while helping the Japanese firm catch up with domestic rivals who have been expanding their investment bank operations overseas.
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Japan’s biggest lenders have been strengthening ties with US counterparts to broaden revenue streams across borders and business lines. Mitsubishi UFJ Financial Group Inc bought a stake in Morgan Stanley during the 2008 global financial crisis and remains its biggest shareholder. Mizuho Financial Group Inc acquired boutique investment bank Greenhill & Co to offer more advice on global mergers.
Senior Jefferies bankers, including chief executive officer Rich Handler and president Brian Friedman, will be in Tokyo this week to celebrate the partnership and forge closer relationships between the two firms, the FT reported. The US bank, which reports first quarter results on Wednesday, will also hold a board meeting in Japan.
Jefferies’ share slide in recent months has taken a toll on the net worth of Handler and Friedman, who are among the biggest shareholders in the firm after SMFG.
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