Update on mergers and acquisitions
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Mitsubishi UFJ Financial Group has agreed to sell its U.S. consumer banking business to US Bancorp for $ 8 billion, a deal that ends its ambition to build a large retail business in America and accelerates consolidation among the country’s mid-sized lenders.
The Japanese lender said it would receive $ 5.5 billion in cash and $ 2.5 billion in shares of US Bancorp for personal banking operations from MUFG Union Bank, a California-based bank it took over. full ownership in 2008.
The sale is part of a strategic shift by MUFG to focus its retail operations on Japan and Asia, while specializing in corporate transactions in the United States and Europe. The agreement excludes MUFG Union Bank’s merchant and investment banking operations, as well as its activities in global markets.
MUFG’s acquisition of Union Bank was symbolic of the global ambitions of the Japanese banking industry and its attempts to grow beyond the world’s most aging market.
In the aftermath of the 2008 global financial crisis, the Japanese group sought to expand its presence in the United States, spending around $ 3.5 billion to buy the remaining 35% of Union Bank of California that it did not did not already have. Its initial investment in the American bank dates back to 1984 when Mitsubishi Bank acquired the Bank of California, which later merged with Union Bank in 1996.
As part of the deal announced on Tuesday, the $ 2.5 billion U.S. Bancorp MUFG stock will receive the equivalent of an almost 3% stake in the U.S. lender. For US Bancorp, the deal creates a group with combined assets of $ 665 billion and gives it access to the 300 branches of MUFG Union Bank in the United States. The bank said it expects to realize about $ 900 million in pre-tax cost synergies.
The deal is the latest in a series of regional bank mergers in the United States, with midsize lenders facing pressure to consolidate in order to compete with companies like JPMorgan Chase and Bank of America.
MUFG, which owns a 20 percent stake in Morgan Stanley, said its assessment of the United States’ strategic importance remained “unchanged”. Even after the sale, MUFG said the United States would account for more than half of its global business outside of Japan.
Hideyasu Ban, banking analyst at Jefferies, said MUFG’s move made strategic sense. The continuing alliance with Morgan Stanley, as well as the partnership with US Bancorp, should provide it with relatively stable dollar funding, even without Union retail deposits, he said.
Consolidation pressure among US regional banks has intensified in the wake of the global pandemic. M&T Bank agreed in February to acquire its small rival People’s United Financial for $ 7.6 billion. Pittsburgh-based PNC struck an $ 11.6 billion deal last year to buy out the US operations of Spain’s BBVA.
Morgan Stanley and Bank of America advised MUFG on the matter, and US Bancorp was advised by Goldman Sachs.