- SMFG will spend about 5 billion (about US$913 million) to raise its economic stake in Jefferies to 20% via open-market purchases.
- SMFG will keep its voting stake below 5% by using non-voting common or preferred shares for part of the increase.
- SMBC Nikko and Jefferies will form a Japan joint venture, launching in January 2027, combining equities research, sales and trading, and equity capital markets.
- SMBC is also providing Jefferies about US$2.5 billion of new credit facilities, boosting lending and financing capacity while helping SMFG close investment-banking gaps.
Read More
The move marks a deepening of the existing alliance between SMFG (via SMBC and SMBC Nikko) and Jefferies, with the Japanese banking group increasing its economic ownership while maintaining limited direct control, indicated by the decision to keep voting interest under 5%. The use of non-voting or preferred shares for part of the stake rise suggests SMFG aims for influence without assuming full governance responsibilities or triggering major regulatory burdens.
The planned joint venture in Japan is significant. Combining SMBC Nikko’s local distribution, capital markets, and equities franchise with Jefferies’ global reach and advisory strength could create a more competitive platform in Japan, benefitting deal origination, underwriting, and trading. The January 2027 launch date gives both firms time to align operations and manage the cultural and regulatory integration challenges.
The credit facilities—US$2.5 billion—made available by SMBC to Jefferies indicate a further commitment not just in ownership but in financial backing. This gives Jefferies expanded capacity for leveraged lending, U.S. pre-IPO financing, and U.S. asset-backed securitization, while giving SMFG more skin in growth areas.
In a broader strategic context, SMFG has lagged behind Japanese peers (e.g., MUFG, Mizuho) in global investment banking, particularly in equity underwriting and cross-border transactions. The Jefferies partnership fills that gap more rapidly than building out in-house capabilities would allow. For Jefferies, the alliance strengthens its Japanese presence and bilateral deal flow, especially from Japanese corporates and sponsor clients.
Risks and open issues include potential regulatory hurdles if SMFG tries to move stake beyond 20%, as well as cultural resistance within Jefferies over increasing foreign ownership. The efficacy of the joint venture will depend heavily on execution, including talent integration, technology, compliance in both U.S. and Japanese jurisdictions, and managing overlapping responsibilities between SMBC Nikko and Jefferies.
Comparable precedents reinforce significance: MUFG holds over 20% of Morgan Stanley; Mizuho acquired Greenhill; Japanese banks are broadly accelerating internationalization. SMFG’s leadership sees this partnership as “the only way forward” to build investment banking credences internationally.
Supporting Notes
- SMFG will invest ¥135 billion (~US$912.84 million) in Jefferies to raise its economic ownership stake to ~20% from 14.5-15%.
- SMFG will maintain less than 5% voting interest; parts of the stake increase may be in non-voting common or preference shares.
- SMFG’s securities arm, SMBC Nikko Securities, will form a joint venture with Jefferies’ Japanese operation to consolidate equities research, sales & trading, and ECM services, to begin operations in January 2027.
- SMBC is supplying Jefferies with roughly US$2.5 billion in new credit facilities to support leveraged lending in EMEA, pre-IPO finance in the U.S., and other growth areas.
- SMFG’s CEO Toru Nakashima has publicly acknowledged that investment banking is a weakness for the group and that partnering with Jefferies offers a faster way to catch up to rivals.
- Analysts estimate that by the fifth year, profits from the Jefferies stake will contribute ~¥50 billion, of which ~¥10 billion would come from the joint venture.