Jefferies Financial Group (JEF) and Sumitomo Mitsui Financial Group (SMFG), Sumitomo Mitsui Banking or SMBC, SMBC Nikko Securities – SMBC Nikko -, and SMBC Nikko Securities America, collectively SMBC Group, have expanded their strategic alliance to collaborate on future corporate and investment banking business opportunities, as well as in equity sales, trading, and research. This expansion of the alliance will broaden the scope of the collaboration in M&A advisory services and increase the collaboration across the firms’ equities and debt capital markets businesses. The expanded alliance also includes joint coverage of designated investment grade clients that have banking relationships with SMBC and will now have dedicated Jefferies investment banking coverage. SMBC Group will be responsible for credit products and debt capital markets, while Jefferies will be responsible for M&A and equity capital markets. The goal of this important next step in the firms’ path together is to further coordinate Jefferies’ extensive sector and capital markets knowledge with SMBC Group’s banking and debt capital markets expertise combined with a strong balance sheet to support and serve clients. SMBC now intends to increase its investment in Jefferies through direct and indirect open-market purchases of Jefferies’ common shares that will be exchanged for non-voting preferred shares that will be mandatorily convertible into non-voting common shares. In doing so, SMBC plans to raise its economic ownership to up to 15%. SMBC’s $2.25B financing in 2021 and investments will, at current market prices, result in a financial commitment to Jefferies of approximately $3.4B. Jefferies expects to seek approval of the non-voting common shares at a special shareholders’ meeting in July. Upon SMBC ‘s investment reaching or passing 10% of the economic ownership of Jefferies on an as converted and fully diluted basis, SMBC will be entitled to designate a new member to Jefferies’ Board of Directors.
Published first on TheFly
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