Sumitomo Mitsui Financial Group (SMFG) has not given up on a merger with UFJ Holdings to create the world's biggest banking group, its chief said yesterday amid a report SMFG had bettered a cash offer from a rival.
Struggling UFJ Holdings, Japan's fourth biggest banking group, said a week ago it had declined by telephone a merger offer from the Sumitomo group as it wanted to join hands with Mitsubishi Tokyo Financial Group (MTFG).
But, undaunted, SMFG president Toshifumi Nishikawa said on the private Asahi television network his group was still wooing UFJ and was ready to provide it with "necessary funds fully".
Nishikawa also said the merger would be done "in the spirit of being on an equal-footing" in an apparent bid to woo UFJ whose executives may lose posts in the aftermath of a merger with MTFG.
Newspapers reported yesterday that SMFG had sent a written merger proposal to the UFJ group on Saturday following the refusal of UFJ management to meet Sumitomo Mitsui executives in person.
The proposal says Sumitomo Mitsui will inject more than ?500 billion (US$4.5 billion) into UFJ, which has been struggling under a mountain of non-performing loans, and calls for the establishment of a joint holding company by April next year, the Nihon Keizai and Asahi newspapers said.
The offer was apparently better than about ?500 billion committed by rival MTFG, Asahi said, adding Sumitomo Mitsui had said in the letter the capital injection could be expanded to a maximum of ?700 billion.
The proposal also envisages the merger of banking units under the holding company in October next year, the papers said.
The Nihon Keizai economic daily added UFJ Holdings was still believed to be sticking to its original plan to merge with MTFG.
Nishikawa did not confirm the reports but suggested it would be a loss for UFJ not to sit down at the negotiating table with his group.
"It is commonsense for company managers to think about shareholders' benefits," he said.
Other reports said UFJ would seek assistance from automaker Toyota Motor Corp and Nippon Life Insurance in addition to funds from MTFG.
UFJ Holdings needs more money to dispose of increased bad loans, the Yomiuri and Mainichi Shimbun said. The group announced last Friday its non-performing loans reached ?4.62 trillion at the end of June, up from ?3.95 trillion three months ago.
UFJ plans to merge with MTFG, Japan's second-largest and most profitable bank, by the end of September next year. Its merger with either Sumitomo Mitsui or MTFG would create the world's largest banking group with assets of at least ?180 trillion.
Merger talks between UFJ Holdings and MTFG hit a snag when a Tokyo court issued an injunction barring UFJ from conducting talks involving the sale of its trust banking unit.
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