Jefferies Jumps With Sumitomo Mitsui Eyeing a Larger Stake

Daniel Taub, Bloomberg News

Signage outside the Jefferies Financial Group offices in New York, U.S., on Wednesday. Oct. 13, 2021. Photographer: Jeenah Moon/Bloomberg , Bloomberg

(Bloomberg) -- Jefferies Financial Group Inc. shares surged Wednesday on a report that Japan’s Sumitomo Mitsui Financial Group Inc. is considering raising its stake in the US investment bank.

Sumitomo Mitsui Chief Executive Officer Jun Ohta said he hoped to make Jefferies an equity-method affiliate, which could involve an interest of 20% to 50%, according to Nikkei, which later removed the reference to the percentage figures in its story. Ohta didn’t say when his firm might make an additional investment, and indicated that such decisions would come once his company holds discussions with New York-based Jefferies and US regulators.

“We’ve decided to move toward increasing our holdings,” Ohta told Nikkei in an earlier version of the story, which has since been modified to state that it’s the CEO’s wish. The Japanese company already has a stake of almost 5% in Jefferies, part of a strategic alliance reached last year.

A representative for Jefferies had no immediate comment, and Sumitomo Mitsui didn’t immediately respond to a request for comment. Jefferies is scheduled to report its fourth-quarter earnings on Monday.

Jefferies shares surged 13% Wednesday, their biggest increase since April 2009, after rising as much as 19% in intraday trading. The stock has declined 1.5% in the past 12 months.

In an earlier interview with Bloomberg News, Ohta said that Sumitomo Mitsui and the Wall Street firm can do more together.

For Jefferies, “our balance sheet is attractive, and, for us, their investment-banking capability is attractive,” he said. “I think there are strong possibilities in Europe as well. Our investment-banking capability is weak there.”

The Japanese bank isn’t alone in seeing Jefferies as an attractive investment. Berkshire Hathaway Inc. took a position in the firm even as it trimmed its stake in financial stocks including U.S. Bancorp and Bank of New York Mellon Corp. Berkshire held more than 433,000 shares of Jefferies as of Sept. 30, making it one of three new bets unveiled by Warren Buffett’s conglomerate in November, alongside chipmaker Taiwan Semiconductor Manufacturing Co. and manufacturer Louisiana-Pacific Corp.

--With assistance from Paige Smith and Sridhar Natarajan.

(Updates Wednesday’s share move in fifth paragraph. An earlier version of this story corrected the 12-month stock-price move in fifth paragraph.)