Sumitomo Mitsui Financial Group (SMFG) has created an internal team to keep watch on market developments and to be ready to move on a potential acquisition of Jefferies Financial Group if the U.S. bank’s share price provides what SMFG regards as a compelling opportunity, people familiar with the matter said, according to a report.
The disclosure prompted a sharp market reaction. In U.S. pre-market trading at 04:42 ET (08:42 GMT), Jefferies shares rose 9.3%, extending gains from Monday, when the stock closed at $39.55 after finishing 3.72% higher. Shares of Jefferies listed in Frankfurt climbed about 6% after the report, and SMFG shares closed up 2.78% in Tokyo.
Those market moves do not mean a transaction is imminent. Sources told the report that Jefferies’ management may not agree to a sale at current valuations, and that any action by SMFG is not immediate. The formation of the internal team is intended to monitor conditions and signal readiness rather than to announce a firm bid.
Jefferies has endured a difficult stretch this year, with its market value falling by more than 36% amid intensifying questions about its lending practices and risk appetite. The firm’s Leucadia Asset Management unit held roughly $715 million in receivables tied to the bankruptcy of U.S. auto parts maker First Brands, a sizeable exposure that contributed to pressure on the stock. Additional strain followed the collapse of British lender Market Financial Solutions.
Legal pressure has also mounted. Investors have filed suits accusing Jefferies of misleading them into a fund connected to First Brands. As of the report, Jefferies’ market capitalization stood at about $8.17 billion, versus SMFG’s roughly $124 billion, a gap that market commentators noted would make a full acquisition financially feasible for the Japanese bank should both sides agree.
While the market reaction reflected renewed attention on Jefferies, the situation remains fluid. The internal SMFG team’s activity is preparatory, and there is no confirmation of negotiations or a formal offer. Likewise, Jefferies’ balance of legal, credit and reputational issues continues to shape investor sentiment and its valuation.
Observers and market participants will be watching for any change in Jefferies’ stock trajectory, updates from the firms involved, or further developments in the lawsuits and credit exposures that have weighed on the company this year.