Sumitomo Mitsui Financial Group Inc. announced Tuesday that it has offered UFJ Holdings Inc. a deal for the two banks to merge on an equal basis, in its latest attempt to woo UFJ away from rival Mitsubishi Tokyo Financial Group Inc.
UFJ has already signed a basic accord with MTFG to combine their operations in October 2005. The tieup would create the world’s largest banking group, with assets worth 189 trillion yen.
UFJ has not announced any change in its plans to accept a capital increase from MTFG by the end of September and merge with the group later.
But Sumitomo Mitsui spokesman Takashi Morita said SMFG believes there is a chance UFJ may still decide to back out of the merger with MTFG.
The Tuesday statement from SMFG disclosed key details of a proposal made earlier this month. The plan offers a one-to-one merger ratio to UFJ, the weakest of Japan’s four mega-banking groups.
“We strongly hope UFJ will consider our proposal positively, as we believe our integration with UFJ would be the best option for stockholders, customers and employees of both groups,” SMFG said in the statement.
SMFG, the third-ranked banking group, said the ratio is based on the recent stock prices of the two financial groups and gives a 30 percent premium to UFJ stock prices.
If created, a new SMFG-UFJ group could save 200 billion yen in the first year of operations through the consolidation of branch offices and other restructuring steps, SMFG said.
The proposal, which has a deadline of Sept. 24, also offers a 700 billion yen capital injection to UFJ.
In response to the proposal, UFJ said in a statement only, “We are carefully considering the proposal with outside specialists.”
SMFG’s move prompted speculation among some analysts that SMFG may be aiming to force MTFG to shoulder a bigger financial burden in order to outbid SMFG.
They added that SMFG may be hoping that MTFG comes out of the merger talks with its financial strength weakened.
Naoko Nemoto, senior analyst at credit-rating agency Standard & Poor’s, said, “SMFG may intend to drive MTFG into unfavorable conditions by taking a risk to announce such a proposal, although it may understand there is only a slight chance of merging with UFJ.”
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