Sumitomo Trust & Banking Corp. on Friday filed an application with the Tokyo District Court to seek an injunction to halt merger talks between UFJ Holdings Inc. and Mitsubishi Tokyo Financial Group Inc., saying the UFJ group’s decision to cancel its plan to sell UFJ Trust Bank to Sumitomo is a breach of contract.
Sources familiar with the action said Sumitomo Trust will also sue UFJ Holdings, UFJ Bank President Takamune Okihara and others for damages in connection with the case.
UFJ Holdings issued a statement late Friday, saying it cannot comment on Sumitomo trust’s legal action because it has not received a copy of the petition.
The UFJ group said Wednesday it has canceled its plan to sell UFJ Trust Bank to Sumitomo Trust to collectively integrate its commercial banking, trust banking and securities operations with MTFG.
Such legal action to halt a merger is rare in corporate Japan and might affect upcoming merger talks between the two major banking groups.
On May 21, Sumitomo Trust and UFJ Trust Bank announced they had agreed to integrate operations in a deal to create the biggest trust bank in Japan, eclipsing Mitsubishi Trust & Banking Corp.
The deal called for the UFJ financial group to sell UFJ Trust to a new trust bank to be established by Sumitomo Trust. UFJ Holdings Inc., which leads the group, will purchase a stake in the new bank.
The deal had also envisaged the two trust banks establishing a holding company for the integration of management.
After the UFJ group made a formal offer Wednesday to MTFG for the integration of the two groups, Sumitomo said in a statement, “We and the UFJ group signed a legally binding basic agreement on May 21” on the purchase of UFJ Trust.
“We are considering an appropriate response, including legal action,” against the UFJ group, the statement said.
In fiscal 2003, UFJ Holdings incurred a group net loss of 402.81 billion yen, compared with the previous year’s loss of 608.92 billion yen, as it continued to rack up expenses related to the disposal of bad loans extended mainly to large borrowers.