Jefferies shares surge on report of Japan’s SMFG preparing for potential buyout

By Shivani Tanna and Manya Saini

March 24 (Reuters) – Jefferies shares surged 10% in premarket trading on Tuesday after the Financial Times reported that Japan’s Sumitomo Mitsui Financial Group is working on plans for a possible takeover of the U.S. investment bank.

SMFG, which owns a 20% stake in the bank, has assembled a small team to prepare for a potential move if a drop in Jefferies’ share price creates an opportunity, the newspaper said, citing people familiar with the matter.

Jefferies is battling investor concerns over its lending standards and risk appetite following its exposure to collapsed British lender Market Financial Solutions and U.S. auto-parts supplier First Brands amid alleged fraud.

Shares in the bank have fallen about 36% so far this year, as of the last close, after declining 21% in 2025, leaving it with a market capitalization of roughly $8.2 billion.

“Jefferies is our important partner. We decline to comment on hypothetical assumptions or rumors,” SMFG, which has a market value of about $124.4 billion, said in a statement.

Reuters could not independently verify the report.

Jefferies, whose Frankfurt-listed shares rose more than 6%, did not immediately respond to a request for comment.

INVESTORS TURN COLD

Jefferies, an independent investment bank that competes with some of Wall Street’s biggest names, has faced investor scrutiny over its exposure to risky companies and its risk‑management discipline, though analysts have repeatedly said the bank remains on a firm footing.

Investors have sued Jefferies, alleging the bank defrauded them into investing in a fund linked to bankrupt auto-parts supplier First Brands, which owed Jefferies’ Leucadia Asset Management arm about $715 million ​of receivables. The bank has denied any wrongdoing.

Earlier this month, Western Alliance sued Jefferies for not completing payment of $126.4 million it owed to the regional lender for loans tied to First Brands.

It fired back days later arguing that Western Alliance had not extended credit to the investment bank and added it expects losses tied to collapsed UK mortgage lender Market Financial Solutions to be under $20 million.

Jefferies is set to report earnings after markets close on Wednesday, kicking off a closely watched earnings season for Wall Street’s largest banks.

Analysts expect a surge in profit, according to data compiled by LSEG, with the bank’s core business set to accelerate as mergers and acquisitions rebound in 2026 after a years-long slump.

Focus, however, will be on executive comments on its exposure to Market Financial Solutions, its legal dispute with Western Alliance and plans to revive the stock.

Falling share prices often draw takeover interest, as buyers target discounted assets ahead of a potential rebound.

EXPANSION OPPORTUNITY

Any deal could face significant hurdles, including regulatory scrutiny in the U.S. over foreign ownership of a financial institution, as well as cultural and operational differences that have historically complicated cross-border bank acquisitions.

Japan’s second-largest banking group first picked up a stake in Jefferies in 2021. In September, it said it would invest a further 135 billion yen ($912.84 million), taking its stake to up to 20% from 14.5%.

With Japan’s stock market seeing larger deal sizes, more cross-border transactions and rising overseas capital inflows, the alliance would help SMFG’s securities arm better meet issuer and investor demand, an executive said at the time.

In 2025, Jefferies ranked seventh in Dealogic’s global investment banking league tables, which rank firms by revenue. SMFG placed third in Japan-exclusive investment banking revenue league tables, behind rivals Nomura and Mizuho, the data shows.

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 Manya Saini and Shivani Tanna in Bengaluru; Additonal reporting by Anton Bridge; Editing by Nivedita Bhattacharjee and Sriraj Kalluvila)