Joint Venture to Combine Equities and ECM Businesses in Japan

Expanding Joint Coverage of Larger Sponsors

In EMEA, Implementing Joint Origination, Underwriting and Execution of Syndicated Leveraged Finance for These Clients

SMBC to Increase Equity Ownership in Jefferies to up to 20% in the Open Market

SMBC to Provide Jefferies Approximately $2.5 Billion in New Credit Facilities to Support Jefferies and to Facilitate Collaboration Efforts

Jefferies Financial Group, Inc. and Sumitomo Mitsui Financial Group, Inc., Sumitomo Mitsui Banking Corporation, and SMBC Nikko Securities Inc. announced that they are significantly expanding their Global Strategic Alliance.

SMBC Group and Jefferies initially entered into a Strategic Alliance in 2021 to collaborate on future corporate and investment banking business opportunities. In 2023, the Alliance was expanded to enhance collaboration across M&A, equity and debt capital markets, with a particular focus on investment grade clients in the U.S. SMBC Group and Jefferies subsequently added Memoranda of Understanding to expand their alliance to the EMEA region, Canada, Asia and Australia, as well as to expand the scope of Joint Coverage initiatives to larger global sponsors, pre-IPO companies, and sub-investment grade corporate clients.

Jefferies and SMBC Group announce the next significant steps in their Global Strategic Alliance that will further capitalize on their unique business strengths and enhance their abilities to meet the global needs of their borrowing, investing, corporate and sponsor clients. This will include combining their Japanese equities and ECM businesses, expanding joint coverage of larger sponsors and implementing in EMEA joint origination, underwriting and execution of syndicated leveraged loans for these clients, SMBC agreeing to increase its equity ownership in Jefferies to up to 20% in the open market, SMBC providing Jefferies approximately $2.5 billion in new credit facilities to support Jefferies and to facilitate collaboration efforts, including EMEA leveraged lending, U.S. pre-IPO lending and asset-backed securitization, subject to receipt of applicable regulatory approvals.

SMBC Group and Jefferies have entered into a Memorandum of Understanding to establish a joint venture in Japan to conduct the principal aspects of their wholesale Japanese equity research, sales and trading and equity capital markets businesses. Jefferies and SMBC Group anticipate the joint venture will begin serving clients in January 2027. The new joint venture will be integrated with Jefferies’ leading global equities business to provide institutional investors with insight and execution across markets around the world on a seamless and consistent basis.

With SMBC and SMBC Nikko’s expertise in the domestic market and balance sheet strength, and Jefferies’ leading position with global investors and advanced trading technology, SMBC Group and Jefferies have the goal of ultimately being the leading provider in wholesale equities and equity capital markets in Japan.

Joint Sponsor Coverage

SMBC Group and Jefferies will expand their joint coverage of larger sponsors to offer the investment and corporate banking capabilities of both Jefferies and SMBC Group to such large sponsor clients in EMEA.Expanding SMBC’s Equity Ownership in Jefferies from 15% to up to 20%SMBC intends to increase its economic ownership of Jefferies to up to 20% (on an as-converted and fully diluted basis) by purchasing shares in the open market and then exchanging those common shares for either non-voting common shares or non-voting preferred shares that will be mandatorily convertible into non-voting common shares. SMBC will continue to own less than 5% of a voting interest in Jefferies. The increased investment is subject to receipt of required applicable regulatory approvals.

New and Enhanced Credit Facilities

SMBC Group has agreed to extend total of approximately $2.5 billion credit facilities to support Jefferies and to advance collaboration in key areas, including structured finance such as EMEA leveraged lending, U.S. pre-IPO lending and asset-backed securitization. This newly agreed, substantial financing package of approximately $2.5 billion aims to enhance our commitment to deepening the partnership, enhances our combined capabilities across these focus areas, and enables us to deliver exceptional services to our clients.

Director President and Group CEO of SMFG, Toru Nakashima commented: “Our vision is to align SMBC Group and Jefferies in order to offer our clients the best financing and advisory solutions to meet their needs around the world. We are pleased with our progress to date, see today’s expansion of our Global Strategic Alliance as a further step in achieving our goal and believe we are early in realizing our joint potential.”

Rich Handler, Jefferies’ CEO, and Brian Friedman, its President, stated: “SMBC Group and Jefferies together are unique in the power of our combined global platforms. From M&A and other strategic advice to balance sheet and capital markets financing to research, sales and trading in the daily capital markets, our combined capabilities offer exceptional value to our clients around the world.”

Source: Sumitomo Mitsui Financial Group