Japanese banking organization Sumitomo Mitsui Financial Group is believed to be about to concede defeat in its attempts to merge with UFJ Holdings, according to sources close to the situation.
Sumitomo Mitsui, Japan’s third-biggest bank, put forward a plan to merge with UFJ, the smallest of Japan’s four major financial groups, last summer even though UFJ had already entered an agreement with Tokyo Financial Group. Now Sumitomo is expected to put an end to its plans when its board meets on Friday to discuss the issue.
Although Sumitomo offered a merger of equals while Tokyo Financial’s offer valued UFJ as the smaller partner, UFJ has stayed loyal to its agreement. In line with that agreement, Mitsubishi Tokyo and UFJ announced last week an agreement to exchange 10 UFJ shares for 6.2 Mitsubishi Tokyo shares in their merger, which valued Tokyo higher than UFJ.
However, the deal proved to contain more value for UFJ than was expected, thus weakening Sumitomo’s position and leading to the speculation that Sumitomo would abandon its plans.
If the UFJ and Tokyo Financial merger is completed, it would create the largest banking organization in the world. An official announcement from Sumitomo is expected after its board meeting.