Jefferies shares cut gains on report Japan's SMFG has no immediate takeover plan
FILE PHOTO: People walk outside of Jefferies Financial Group offices in Manhattan, New York, U.S., December 8, 2021. REUTERS/Eduardo Munoz/File Photo
March 24 : Jefferies shares pared earlier gains on Tuesday after Bloomberg News reported that Japan's Sumitomo Mitsui Financial Group has no immediate plans to take over the U.S. bank, countering a Financial Times report.
Japan's second-largest lender, which owns a 20 per cent stake in Jefferies, is not engaged in acquisition talks with the Wall Street investment bank due to various obstacles to further integrating Jefferies, Bloomberg News reported, citing people with direct knowledge of the matter.
Shares of the U.S. bank, which had risen more than 10 per cent before the bell on a report of a potential takeover, pared three-fourths of their gains after the latest news.
The stock has fallen about 36 per cent so far this year, leaving it with a market capitalization of roughly $8.2 billion, and declined 21 per cent in 2025.
Jefferies' exposure to collapsed British lender Market Financial Solutions and losses related to bankrupt U.S. auto-parts supplier First Brands has shaken investor confidence in the company's lending standards and risk appetite.
"Jefferies is our important partner. We decline to comment on hypothetical assumptions or rumors," SMFG, which has a market value of about $124.4 billion, said in a statement.
The comments were in response to the FT report, which said that the company has assembled a small team to prepare for a potential move if a drop in Jefferies' share price creates an opportunity, citing sources earlier on Tuesday.
Jefferies declined to comment on the matter.
INVESTORS TURN COLD
Jefferies, an independent investment bank that competes with some of Wall Street's biggest names, has faced investor scrutiny over its exposure to risky companies and its risk‑management discipline, though analysts have repeatedly said the bank remains on a firm footing.
Investors have sued Jefferies, alleging the bank defrauded them into investing in a fund linked to bankrupt auto-parts supplier First Brands, which owed Jefferies' Leucadia Asset Management arm about $715 million ​of receivables. The bank has denied any wrongdoing.
Earlier this month, Western Alliance sued Jefferies for not completing payment of $126.4 million it owed to the regional lender for loans tied to First Brands.
Jefferies fired back days later, arguing that Western Alliance had not extended credit to it and added that it expects losses tied to Market Financial Solutions to be under $20 million.
Jefferies is set to report earnings after markets close on Wednesday, kicking off a closely watched earnings season for Wall Street's largest banks.
Analysts expect a surge in profit, according to data compiled by LSEG, with the bank's core business set to accelerate as mergers and acquisitions rebound in 2026 after a years-long slump.
Investor focus, however, will be on executive comments on Jefferies' exposure to Market Financial Solutions, its legal dispute with Western Alliance and plans to revive the stock.
Falling share prices often draw takeover interest, as buyers target discounted assets ahead of a potential rebound.
EXPANSION OPPORTUNITY
Any deal could face significant hurdles, including regulatory scrutiny in the U.S. over foreign ownership of a financial institution, as well as cultural and operational differences that have historically complicated cross-border bank acquisitions.
SMFG, which already has a board seat at Jefferies, first picked up a stake in the company in 2021. In September, it said it would invest a further 135 billion yen ($912.84 million), taking its stake to up to 20 per cent from 14.5 per cent.
With Japan's stock market seeing larger deal sizes, more cross-border transactions and rising overseas capital inflows, the alliance would help SMFG's securities arm better meet issuer and investor demand, an executive said in September.
In 2025, Jefferies stood seventh in Dealogic's global investment banking league tables, which rank firms by revenue. SMFG placed third in Japan-exclusive investment banking revenue league tables, behind rivals Nomura and Mizuho, the data showed.
"We think SMFG is highly unlikely to move to make Jefferies a subsidiary simply because the latter's stock has declined," analysts at J.P. Morgan wrote in a note.
