Mitsubishi Tokyo Financial is set to complete its merger with UFJ Holdings and become the world's biggest bank, after Sumitomo Mitsui Financial formally withdrew its rival bid for Japan's fourth-largest bank.
Having fought an eight-month battle to acquire UFJ, Sumitomo said in a statement that it had withdrawn its $35 billion bid for its smaller rival after monitoring recent stock price movement. Investors were believed to have already accepted that a merger of UFJ and Mitsubishi would proceed.
In proposing integration with UFJ in August last year, Sumitomo tabled a superior offer to Mitsubishi’s $29 billion deal. However, UFJ’s management stated a preference for a union with Mitsubishi, while analysts questioned whether Sumitomo’s link-up with UFJ would create long-term value for shareholders.
In pulling out of the most high-profile fight in Japanese banking history, Sumitomo may now be forced to look at other possible acquisitions, such as Daiwa Securities. In contrast, the combination of Mitsubishi and UFJ will create the world’s biggest banking group with assets of $1.8 trillion, overtaking US giant Citigroup. The new unit will, however, still lie behind Citigroup in terms of market capitalization.
Upon notification of Sumitomo’s position, UFJ announced its expectation to complete its merger with Mitsubishi in October 2005, subject to shareholder and regulatory approvals.