Japan court lets banks resume talks

Bid war looms as No. 2, No. 3 compete for No. 4


TOKYO - A Tokyo court granted an appeal by UFJ Holdings yesterday that clears the way for the struggling Japanese bank to resume merger talks with its larger rival, the Mitsubishi Tokyo Financial Group, in a deal that could create the world's largest bank.

The Tokyo High Court reversed an injunction by a lower court that had banned UFJ from including its money-management unit in the merger negotiations because of a previous agreement to sell that business to another bank, the Sumitomo Mitsui Financial Group.

But in another development that looked like the start of a bidding war, Mitsubishi Tokyo said in a statement yesterday that it was prepared to put as much as 700 billion yen ($6.3 billion) into UFJ, exceeding the 500 billion yen ($4.5 billion) offered by Sumitomo Mitsui this week.

The court decision removed a roadblock in the negotiations between UFJ, Japan's fourth-largest bank, and the No. 2 bank, Mitsubishi Tokyo. The banks announced last month that they planned to combine under a single holding company by next year.

The two could announce a basic agreement as early as this week, according to a UFJ bank official who insisted on not being identified.

The ruling was a setback for Japan's third-largest bank, Sumitomo Mitsui, which also wants to buy UFJ and was counting on the injunction to nudge UFJ into giving Sumitomo a leg up.

The court action was the latest development in a highly unusual Japanese takeover battle that promises to stir up the clubby banking industry. The bank that buys UFJ will probably become the world's largest in terms of assets, surpassing both the Mizuho Financial Group, Japan's largest bank, and Citigroup Inc. The winner could emerge as the leading bank amid an increasingly vibrant economic recovery in Japan.

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