Sun, Feb 20, 2005 - Page 11 News List

Japanese banks announce terms for huge merger

INTEGRATION Despite opposition from other firms, Mitsubishi Tokyo Financial Group and UFJ Holdings plan to create the world's largest bank


Two Japanese banking giants have announced the terms of their ?3.99 trillion (US$38 billion) merger planned for later this year that will create the world's largest bank, including job cuts and a profit target.

Two of Japan's "Big Four" banks, Mitsubishi Tokyo Financial Group Inc and UFJ Holdings Inc, agreed last year to merge their operations by October next year. The deal creates the world's largest bank with assets totaling nearly ?190 trillion (US$1.8 trillion).

The merger ratio will be 0.62 Mitsubishi Tokyo share to one UFJ share, both sides said in a statement on Friday.

The merger is being challenged by rival Sumitomo Mitsui Financial Group Inc, another "Big Four" bank, which is offering a one-for-one stock swap that will put a premium on UFJ shares.

Sumitomo Mitsui said in a statement late Friday it was studying the latest announcement and will soon respond.

Mitsubishi Tokyo and UFJ shareholders will be asked to approve the merger proposal at a meeting in June.

Standard & Poor's Ratings Service upgraded its long and short-term ratings on UFJ Bank and UFJ Trust Bank late Friday, citing the stronger likelihood that the merger will be approved.

"The announced integration ratio is within market expectations and more detailed information on the merger has been released," it said in a statement.

Standard & Poor's also affirmed its long-term ratings on Mitsubishi Tokyo bank and its trust banking unit, saying their credit quality will remain stable if the merger goes according to plan.

Mitsubishi Tokyo and UFJ said they plan to cut 6,000 jobs -- or about 8 percent of their current combined global work force -- in three years following the merger, including local staff.

The merged banks will aim for group net profit of ?1.1 trillion (US$10 billion) in the 2008 fiscal year.

By the fiscal year ending March 2009, the combined entity will close 170 retail outlets out of some 900 they have now. After the merger, the financial giant will go under the name Mitsubishi UFJ Financial Group, or MUFG, they said.

Sumitomo Mitsui has been trying to stop the Mitsubishi Tokyo-UFJ merger although management at Mitsubishi Tokyo and UFJ have repeatedly said it will go ahead.

Ryosuke Tamakoshi, UFJ Holdings president, would become chairman of MUFG, with Mitsubishi Tokyo President Nobuo Kuroyanagi becoming the president.

Tamakoshi expressed confidence that the two groups' strengths complement each other and that the merger can win shareholders' approval.

"We made the best decision," he told reporters. "I think we can gain approval."

Last year, Mitsubishi Tokyo pumped ?700 billion into UFJ Bank, the group's major banking unit, to support UFJ's battered finances and discourage a takeover by Sumitomo Mitsui.

UFJ has been losing money, is saddled with troubled borrowers and needs a strong merger partner.

But both Sumitomo Mitsui and Mitsubishi Tokyo want UFJ's extensive branch network, individual customer base and its key corporate clients such as Toyota Motor Corp. And they believe size is critical to win against international competition.

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