Japan's Sumitomo Mitsui Financial Group Inc said yesterday it proposed to UFJ Holdings Inc that the two banks merge on an equal basis in its latest attempt to woo UFJ away from a rival suitor.
UFJ has already reached a basic agreement to merge with Mitsubishi Tokyo Financial Group Inc. A merger of UFJ with either of the two banks would create the world's biggest bank in terms of assets.
Sumitomo Mitsui said in a statement it could extend ?700 billion (US$6.3 billion) to help struggling UFJ improve its finances, matching Mitsubishi To-kyo's offer.
Sumitomo Mitsui had earlier said it could extend US$4.5 billion to UFJ.
The new offer would value each UFJ share the same as each Sumitomo Mitsui share, giving UFJ shareholders a 30 percent premium for their stock.
Mitsubishi Tokyo's offer to UFJ had said their merger ratio would be determined by the banks' stock prices.
"The merger of our group and UFJ would be the best choice for the shareholders, customers, and employees of both companies," Sumitomo Mitsui said. "We strongly hope our proposal will be positively considered."
Sumitomo Mitsui said its offer for a 1-to-1 merger would expire on Sept. 24.
UFJ said in a statement that it had not changed its plans to merge with Mitsubishi Tokyo by the end of September 2005 but would "carefully consider" Sumitomo Mitsui's offer.
On Tuesday, UFJ's shares ended up 3 percent at ?510,000 (US$4,640) while Sumitomo Mitsui's shares closed down 0.16 percent at ?629,000 (US$5,290).
With combined assets of about ?188 trillion (US$1.7 trillion), UFJ and Mitsubishi Tokyo would create the world's largest bank in terms of assets, surpassing US-based Citigroup Inc's US$1.19 trillion.
A merger of UFJ and Sumitomo Mitsui would also create the world's largest bank, with assets of ?184 trillion (US$1.67 trillion).
UFJ, Mitsubishi Tokyo and Sumitomo Mitsui are three of Japan's Big Four banking groups. Although the other three posted profits for the latest fiscal year, UFJ recorded a loss of nearly US$3.6 billion.
Sumitomo Trust, a unit of Sumitomo Mitsui, has sought an injunction against the UFJ-Mitsubishi Tokyo merger, citing an earlier agreement it had to buy UFJ's trust banking operations. UFJ scrapped that deal when it began merger talks with Mitsubishi Tokyo last month.
Sumitomo says the trust banking deal is legally binding, and it is appealing to Japan's Supreme Court.
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