March 24 (Reuters) - Japan's Sumitomo Mitsui Financial Group is working on plans for a possible takeover of Jefferies, the Financial Times reported on Tuesday, sending shares of the U.S. investment bank up 9% in premarket trading.
SMFG, Japan's second-largest banking group, has assembled a small team to prepare for a potential move if a drop in Jefferies' share price creates an opportunity, the report said, citing people familiar with the matter.
Shares in the U.S. investment bank, which competes with some of Wall Street's biggest names, have fallen more than 36% this year after steep declines last year when a unit linked to Jefferies' asset management arm was involved in the bankruptcy of U.S. auto parts supplier First Brands.
It has come under scrutiny over its lending standards and risk appetite. Investors are suing the bank, alleging it defrauded them into investing in a fund linked to First Brands, which owed Jefferies' Leucadia Asset Management arm about $715 million in receivables.
Reuters could not immediately verify the report. SMFG declined to comment and Jefferies did not immediately respond to a request for comment.
The U.S. firm has a market capitalisation of $8.17 billion as of Monday's close, according to LSEG data. SMFG's market value is about $124 billion.
SMFG first bought nearly 5% of Jefferies in 2021. In September, Sumitomo Mitsui Banking Corp, the banking arm of SMFG, raised its stake in Jefferies to up to 20% with a $912 million investment.
Any move by Japan's SMFG is not imminent, the FT report said, adding there is no certainty Jefferies' executives would be willing to sell at a depressed share price.
SMFG will hold off if market conditions or Jefferies' management do not allow a full takeover, the newspaper added.
Reporting by Shivani Tanna in Bengaluru; Editing by Nivedita Bhattacharjee
Source: Reuters