By Yuma Ikeshita / Yomiuri Shimbun Staff Writer
Japanese megabank group Sumitomo Mitsui Financial Group Inc. $(SMFG)$ has announced it will establish a joint venture with major U.S. securities firm Jefferies Financial Group Inc. as part of a move to reorganize its securities business, which includes its subsidiary SMBC Nikko Securities Inc.
The megabank group will make an additional investment of about 135 billion yen in the U.S. firm. As demand from domestic client companies grows for corporate financing as well as mergers and acquisitions conducted across borders, SMFG aims to build a system capable of providing support for such activities in Japan and abroad.
SMFG is set to acquire an additional 5.5% stake in Jefferies through its subsidiary, Sumitomo Mitsui Banking Corp., under a precondition of obtaining approval from Japanese and U.S. authorities. After forming a capital alliance in 2021, the Japanese megabank group has gradually increased its stake in Jefferies. The latest move will raise the investment ratio to about 20%. The total investment amount will be around 2.1 billion dollars (about 310 billion yen).
In conjunction with the move to strengthen the capital relationship, the two financial groups will establish a joint venture named SMBC Nikko Jefferies Securities Inc. in Japan. SMBC Nikko Securities will provide the majority of the investment. SMFG plans to start the operation of the joint venture in January 2027. The joint venture will serve as the Japanese megabank group's headquarters for operations such as helping Japanese companies raise funds through initial public offerings and capital increases, as well as conducting industry analysis.
Part of SMBC Nikko Securities' functions, including the investment banking division, will be shifted to the joint venture. More than 400 employees will be transferred to the joint venture from SMBC Nikko Securities, and about 70 officials will be sent from Jefferies. Some employees of SMBC Nikko Securities stationed abroad will be moved to branches of Jefferies overseas.
SMFG is also considering establishing an intermediate holding company to be placed above SMBC Nikko Securities and the joint venture, aiming to ensure the cohesive management of the securities businesses.
The Japanese megabank group intends to incorporate the expertise of Jefferies in projects involving overseas companies and investors. "We have nurtured (SMBC Nikko Securities) into a top-class company in terms of businesses related to Japanese stocks," said Takashi Morita, general manager of Sumitomo Mitsui Banking's corporate planning department, at a press briefing held Friday. "However, we have faced hurdles in meeting increasingly diverse and sophisticated demands."
Jefferies enjoys a global reputation, especially in its investment banking division. The company is said to be among the top 10 global companies in terms of revenue generated from equity financing and M&A support, only trailing such companies as Goldman Sachs Group Inc.
SMFG has fallen behind the other two Japanese megabank groups in terms of cross-border business. Mitsubishi UFJ Financial Group Inc. has obtained a share of more than 20% in Morgan Stanley, and the joint venture between the two companies has enabled the financial group to take the lead in the number of cross-border business deals acquired. In 2023, Mizuho Financial Group Inc. purchased U.S. investment firm Greenhill & Co.
As prolonged stagnation in Japan's domestic economy necessitates companies improve capital efficiency, moves such as M&As with overseas companies and management buyouts are increasing. "Despite rising demand for projects related to such moves, the overseas operations of SMBC Nikko Securities have been weak," said Toyoki Sameshima, a senior analyst at SBI Securities Co. "If the company will be able to utilize the expertise of Jefferies, I believe its business will expand."
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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.
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September 22, 2025 08:35 ET (12:35 GMT)
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