Japanese bank receives hostile bid of $29 billion

No. 3 Sumitomo contests Mitsubishi deal for UFJ


TOKYO - The biggest takeover battle in Japanese history got even bigger yesterday as Sumitomo Mitsui Financial Group sought to disrupt a rival's expansion plans with a $29 billion hostile bid for UFJ Holdings.

Sumitomo Mitsui, Japan's third-largest bank, offered to exchange one share of its stock for each share of UFJ, a bid that values UFJ at about $29.14 billion and represents a 23 percent premium over UFJ's share price yesterday.

The offer marked an escalation in the battle for UFJ, the smallest and weakest of Japan's top four banks. UFJ said on Aug. 12 that it had reached a basic agreement to be taken over in October by its preferred bidder, Mitsubishi Tokyo Financial Group, Japan's second-largest bank.

The bank that wins the battle for UFJ will emerge as the world's largest lender, as measured by assets of $1.7 trillion, and the leader in Japanese finance, just as the outlook for the sector is improving amid the country's most vibrant economic recovery in a decade.

"UFJ can't ignore this bid," said Jason Rogers, a bank credit analyst at Barclays Capital in Tokyo, adding, "Mitsubishi Tokyo may have to sweeten the deal."

UFJ said that although there was no change to its plan to combine with Mitsubishi Tokyo, it would "prudently" examine the offer from Sumitomo Mitsui.

UFJ and Mitsubishi Tokyo have already proposed a name for the combined bank, Mitsubishi UFJ Holdings, and outlined a leadership structure. But so far they have left out the crucial detail of how much Mitsubishi Tokyo would pay for UFJ.

By making a concrete bid, Sumitomo Mitsui is putting pressure on UFJ to seriously consider its takeover offer, analysts said. Over the past few months, UFJ has repeatedly rebuffed proposals by Sumitomo Mitsui to begin takeover talks.

Sumitomo Mitsui's move also turns up the heat on Mitsubishi Tokyo to come up with a competitive offer.

The messy and public bidding war for UFJ is highly unusual in Japan's chummy banking world, where mergers have usually been quietly negotiated behind closed doors and often under the guidance of government regulators.

UFJ first announced it was entering merger talks with Mitsubishi Tokyo last month but those talks were soon hung up by a legal challenge from Sumitomo Trust & Banking, a company with close ties to Sumitomo Mitsui.

Sumitomo Trust won a court injunction preventing UFJ from including its profitable money-management unit in the talks with Mitsubishi Tokyo, because UFJ had previously agreed to sell the money-management business to Sumitomo Trust.

That injunction was lifted this month by a higher court, clearing the way for the basic takeover agreement between UFJ and Mitsubishi Tokyo.

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