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Daiwa Securities Group Inc. and Sumitomo Mitsui Financial Group Inc. said Friday their venture capital units will merge Oct. 1.

Daiwa Securities and SMFG said they have agreed to cooperate in expanding their venture capital and buyout investment businesses. They will reportedly launch negotiations on their own merger in the near future.

Daiwa Securities’ unit, NIF Ventures Co., will merge with SMBC Capital Co.

NIF had an outstanding investment balance of 83.6 billion yen at the end of 2004. SMBC Capital’s balance stood at 29 billion yen.

The combined company therefore would have an investment balance of 112.6 billion yen in 1,324 companies, making it the second-largest venture capital company in Japan after JAFCO Co.

To strengthen the capital base of the new company, NIF, which will be the surviving entity in the deal, plans to allot new shares to Daiwa Securities Group, SMFG and Sumitomo Mitsui Banking Corp. before the merger date.

Details of the new share issue have yet to be decided, NIF said.

NIF also said it would withdraw from the loan business to focus on the core venture capital business.

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