UFJ court win clouds bank merger
(CNN) -- Japanese megabank Sumitomo Mitsui Financial Group (SMFG) says it will push ahead with its proposed merger with UFJ Holdings.
It made the announcement after the market closed Wednesday.
Earlier in the day, UFJ won an appeal against an injunction blocking takeover talks with SMFG's rival, Mitsubishi Tokyo Financial Group (MTFG).
The ruling, by the Tokyo High Court, surprised observers and dealt a blow to SMFG's chances.
UFJ, Japan's fourth-largest banking group, confirmed earlier this week that it had received a merger proposal from SMFG.
The offer, pitched at about $4.5 billion, added to the bidding tension surrounding UFJ, which already had a favored suitor in MTFG.
While UFJ said Monday it would examine the new offer, it said there was no change to its agreement last month to begin integration talks with MTFG.
On Sunday, SMFG president Yoshifumi Nishikawa told Japanese television he had offered UFJ more than 500 billion yen ($4.52 billion) in a formal merger proposal.
Japanese media reports say MTFG has offered UFJ a 500 billion yen cash injection to help it deal with losses from bad loans.
UFJ last Friday posted a net first-quarter loss of 91.58 billion yen. It is the weakest of Japan's four megabanks and the only one to post a loss last financial year.
According to the Nihon Keizai Web site Wednesday, sources say UFJ and MTFG are now in the final stage of negotiations to sign a merger deal Thursday.
The two groups aim to merge their holding companies and constituent banks on October 1, 2005.
If the UFJ-MTFG merger were to go ahead, it would create the world's biggest banking group, with assets of 188 trillion yen ($1.7 trillion), putting it ahead of U.S. financial giant Citigroup.
A merger between UFJ and SMFG would create a group with total assets of 180 trillion yen. The other member of Japan's big four, Mizuho Financial Group, has assets of 135 trillion yen.
In May, UFJ had agreed to sell its trust bank to Sumitomo Mitsui, but cancelled that agreement in mid-July so it could pursue merger talks with MTFG.
A Tokyo District Court in late July upheld a challenge from Sumitomo Mitsui against that plan, and ordered UFJ and MTFG to put their talks on hold.
But the Tokyo High Court on Wednesday afternoon repealed that temporary injunction, allowing trust bank merger talks between the two banking groups.
Shares in UFJ closed 5.2 percent up at 487,000 yen Wednesday. SMFG was 1.2 percent ahead to 645,000 yen and MTFG ended almost 7 percent higher to 1.02 million yen.
