Japan’s SMFG prepares for possible takeover of Jefferies, FT reports

[TOKYO] Japan’s Sumitomo Mitsui Financial Group (SMFG) is working on plans for a possible takeover of Jefferies, the Financial Times reported on Tuesday (Mar 24), sending shares of the US investment bank up 9 per cent in pre-market trading.

SMFG, Japan’s second-largest banking group, has assembled a small team to prepare for a potential move if a drop in Jefferies’ share price creates an opportunity, the report said, citing people familiar with the matter.

Shares in the US investment bank, which competes with some of Wall Street’s biggest names, have fallen more than 36 per cent this year after steep declines last year when a unit linked to Jefferies’ asset management arm was involved in the bankruptcy of US auto parts supplier First Brands.

It has come under scrutiny over its lending standards and risk appetite. Investors are suing the bank, alleging it defrauded them into investing in a fund linked to First Brands, which owed Jefferies’ Leucadia Asset Management arm about US$715 million in receivables.

Reuters could not immediately verify the report. SMFG declined to comment and Jefferies did not immediately respond to a request for comment.

The US firm has a market capitalisation of US$8.17 billion as at Monday’s close, according to LSEG data. SMFG’s market value is about US$124 billion.

SEE ALSO

DBS, OCBC, UOB, Japan’s SMFG among Asia’s biggest banks lining up for HSBC’s Indon assets

Activist threat pushes Japanese companies to unwind cross-shareholdings

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

SMFG first bought nearly 5 per cent of Jefferies in 2021. In September, Sumitomo Mitsui Banking Corp, the banking arm of SMFG, raised its stake in Jefferies to up to 20 per cent with a US$912 million investment.

Any move by Japan’s SMFG is not imminent, the FT report said, adding there is no certainty Jefferies’ executives would be willing to sell at a depressed share price.

SMFG will hold off if market conditions or Jefferies’ management do not allow a full takeover, the newspaper added. REUTERS