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Sumitomo enters UFJ merger fray


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Shares in UFJ are surging Friday after Sumitomo Mitsui said it would look at a merger.
FACT BOX
MEGA-BANKS
Assets in trillions of yen
Mizuho Holdings 135
Mitsubishi-Tokyo 106
Sumitomo-Mitsui 102
UFJ Holdings 82
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Japan
Mizuho Financial Group

(CNN) -- Japanese banking giant Sumitomo Mitsui Financial Group says it will offer a business integration proposal to UFJ Holdings, complicating UFJ's planned merger with Mitsubishi Tokyo Financial Group.

The surprise move has sent UFJ stock soaring on the Tokyo Stock Exchange Friday. It is up 5.2 percent to 426,000 yen near the end of the morning session.

But MTFG is down more than 3 percent.

SMFG President Yoshifumi Nishikawa announced the proposal Friday morning, Kyodo news agency reported.

Earlier in the day, SMFG said in a statement that ''Sumitomo Mitsui, along with Sumitomo Trust & Banking Co., is studying offering a merger proposal to UFJ Holdings.''

MTFG, the most profitable of Japan's big four banking groups, said on July 16 it had begun talks on a rescue merger for the heavily indebted UFJ.

That deal would create the world's biggest banking group, with assets of 190 trillion yen ($1.7 trillion), displacing current frontrunner Citigroup, with $1.3 trillion.

In May, UFJ had agreed to sell its trust bank to Sumitomo Mitsui, but cancelled that agreement earlier this month so it could pursue merger talks with MTFG.

A Tokyo court this week upheld a challenge from Sumitomo Mitsui against that plan, and ordered UFJ and MTFG to put their talks on hold.

"There is no change in our policy and we are continuing to seek an early merger agreement," MTFG said Friday.

According to Kyodo, Nishikawa is expected to meet UFJ Holdings President Ryosuke Tamakoshi later Friday to offer the merger proposal.

A merger between UFJ and Sumitomo Mitsui 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.

A Tokyo district court late Tuesday granted Sumitomo Trust & Banking an injunction blocking UFJ from selling its trust bank unit.

The judge ruled UFJ could not negotiate with or provide information to a third party about selling UFJ Trust or merging UFJ Trust with other companies.

UFJ called that decision unfair and said it would appeal. MTFG said the ruling was unexpected.

Shares in MTFG are down 3.8 percent to 1.0 million yen Friday. SMFG is up 0.3 percent to 673,000 yen.


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