Temasek shows the benefits of equities with 25% return
13 July, 2021Unpacking the report on Credit Suisse’s Archegos disaster
20 July, 2021Euromoney, July 15 2021
Two years of international expansion have concluded with a partnership and shareholding deal between Sumitomo Mitsui and Jefferies. There’s a clear role model for US-Japan tie-ups in New York investment banking. Can this new partnership follow it?
Just weeks after taking control of Fullerton India Credit, Sumitomo Mitsui Financial Group has shown a further example of its international ambitions by taking a stake in Jefferies and striking a strategic alliance with the US-based investment bank.
Sumitomo Mitsui – known at the group level as SMBC, though more commonly referred to by analysts as SMFG – will take a 4.9% stake in the firm, worth $386 million, based on the Jefferies closing price of July 13.
An announcement on July 14 said the alliance was “to collaborate on future corporate and investment banking business opportunities”. The statement specifically mentions US leveraged finance, cross-border M&A involving Japanese companies, and US healthcare.
The heart of the idea is to combine SMBC’s balance sheet and Jefferies’ international reach in investment banking.
This is not just a conceptual ambition: the announcement comes with a $1.65 billion revolving credit facility and $250 million subordinated loan from SMBC to the leveraged finance underwriting affiliate of Jefferies, as well as an additional $350 million revolving credit facility to Jefferies more broadly.
The two institutions have a relationship going back at least 10 years, particularly in equity trading in Japan and the US. The credit line reflects SMBC’s trust that Jefferies can do a lot more with that money than SMBC itself can.
From the Japanese lender’s perspective, it is starting to look more and more like rival Mitsubishi UFJ Financial Group (MUFG). We commented following the Fullerton India deal that SMBC had now successfully rolled out chief executive Jun Ohta’s plan to gain exposure to high-growth Asian economies in Vietnam, the Philippines in India, with stakes in FE Credit, RCBC and Fullerton India Credit respectively, in an effort to combat low-to-negative growth at home.
Taking on New York, though, is something new.
To read the full article link here
