Mitsubishi UFJ, Sumitomo Trust Reach Deal

Posted 21 November 2006 @ 11:41 am EET     Print     Reprint     E-Mail     Comments

TOKYO (AP) - Mitsubishi UFJ and Sumitomo Trust reached a 2.5 billion yen ($21 million) settlement Tuesday in a dispute over failed merger plans, ending a two-year court battle embroiling Japan's major banking groups.

"The lawsuits has been settled peacefully and totally," Mitsubishi UFJ Financial Group said in a statement.

Sumitomo Trust & Banking Co. had been squabbling with the former UFJ Holdings for scuttling a planned alliance and merging with another banking company.

The two had agreed on a broad tie-up under which Sumitomo Trust would take over UFJ's trust banking operations.

But UFJ scrapped that agreement and merged last year with Mitsubishi Tokyo Financial Group Inc. to form Mitsubishi UFJ Financial Group, Japan's biggest bank by assets and market capitalization.

Since 2004, Sumitomo Trust had sought a court injunction to halt the negotiations between UFJ and Mitsubishi Tokyo, saying that violated their earlier agreement. When that failed, it filed a lawsuit, demanding the merger be stopped. The Supreme Court ruled in favor of UFJ.

In February, Sumitomo Trust filed a damage lawsuit in Tokyo District Court, demanding 100 billion yen ($850 million) in compensation.

But both sides opted for an out-of-court settlement, which in Japan is arbitrated by the court, because they decided a drawn out court battle was negative for their image.

Sumitomo Mitsui, UFJ and Mitsubishi Tokyo comprised three of Japan's formerly "Big Four" banking groups.

Japan's banks have been merging and setting up alliances over the past decade, during which a massive bad-debt problem and long economic slowdown have weighed heavily on the banks.

Sumitomo Mitsui Financial Group Inc. had also sought a merger with UFJ but gave up as UFJ opted in favor of Mitsubishi Tokyo.

The battle over UFJ was unprecedented here because Japan's banking was long orchestrated by the government during the decades of the nation's modernization after its defeat in World War II.