The saga over struggling UFJ Holdings Inc. took a new twist Friday when its estranged peer, Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest banking group, asked it to enter into merger talks.
UFJ immediately turned down the request, saying it is still seeking a merger with Mitsubishi Tokyo Financial Group Inc., the third-largest banking group.
On Tuesday, the Tokyo District Court issued an injunction that effectively put the UFJ-MTFG merger talks on hold. If the two are allowed to team up, it would create the world’s largest banking group, with total assets of 190 trillion yen.
MTFG said separately that it still plans to merge with UFJ, and UFJ said in a statement, “There is no change in our basic goal to have a comprehensive integration with MTFG.”
A UFJ spokesman said SMFG asked that its president, Yoshifumi Nishikawa, be allowed to meet UFJ Holdings President Ryosuke Tamakoshi to formally ask for merger negotiations, but UFJ declined.
The UFJ-MTFG merger talks, however, are currently stalled because of the temporary injunction issued to block the sale of UFJ’s trust bank unit to MTFG.
The injunction came after Sumitomo Trust & Banking Co. filed a petition claiming this was a breach of UFJ’s agreement made in May to sell its trust banking unit to Sumitomo Trust.
In the wake of the injunction, UFJ filed an appeal against Tuesday’s court order and is planning to file a petition to a higher court if the appeal is rejected at the district court.
SMFG’s Nishikawa told reporters that UFJ’s plan to pursue a merger with MTFG could change, depending on moves surrounding Sumitomo Trust and UFJ Trust Bank.
An SMFG-UFJ merger would increase the strengths of both groups, including in lending to small and midsize companies as well as to individuals, Nishikawa said. The combined assets of SMFG and UFJ would come to 180 trillion yen.
The news that SMFG asked UFJ to launch merger talks in cooperation with Sumitomo Trust, which is in the same business group with SMFG, was a surprise to financial markets.
Analysts said the news that SMFG is interested in UFJ is good for UFJ and the financial market.
Naoko Nemoto, director at U.S. credit rating agency Standard & Poor’s, said the news means UFJ found the last resort, even if its merger plan with MTFG fails.
“The biggest risk for UFJ at the moment is that the court struggle with Sumitomo Trust lingers and MTFG’s interest in UFJ wanes,” Nemoto said.
She also stated that the news could be good for Japan’s financial system, as uncertainty over the fate of troubled UFJ had fueled worries of instability.
UFJ share prices rallied Friday on the Tokyo Stock Exchange, closing at 447,000 yen, up 10.37 percent from Thursday.
Information from Kyodo added