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Japan's SMBC will take 20% of India's Yes Bank

SumitomoMitsui Banking Corp. (SMBC), a Japanese lender, has signed a definitive deal to acquire a 20% stake of Indian private lender Yes Bank. This is the largest cross border merger and acquisition in India's finance sector.

Sumitomo Mitsui Financial Group released a statement saying that the total value of this deal is 134.8 billion yen ($1.58 billion), which includes SMBC purchasing shares from eight current shareholders.

SMBC is a subsidiary of Sumitomo Mitsui Financial Group, and the second largest bank in Japan.

Cross-border banking deals are rare in Indian banks due to restrictions on ownership, capital requirements and the state's dominance of the sector. The last major deal was a takeover by Singapore's DBS Group of the troubled Lakshmi Vilas Bank in 2020.

SMBC’s purchase of a stake in Yes Bank will make the bank the largest shareholder. It is also the latest overseas acquisition of a Japanese financial organization as it looks to find new growth sources after years of low interest rates and a shrinking population at home.

Nomura, the investment bank, acquired Macquarie Group’s U.S. public asset management business and its European counterpart for $1.8 billion last month. In December of 2012 Nippon Life Insurance became a fully-owned subsidiary of Bermuda-based Resolution Life for approximately $8.2 billion.

Yes Bank announced in a filing to the stock exchange that SMBC would acquire a stake of 13.19% from State Bank of India (also its largest shareholder) and an aggregate of 6,81% from Axis Bank Bandhan Bank Federal Bank HDFC Bank ICICI Bank IDFC First Bank Limited Kotak Mahindra Bank.

SBI owns a 24 percent stake in Yes Bank as a result the restructuring led by the regulator in March 2020.

Together, ICICI Bank (ICICI Bank), HDFC Bank (HDFC Bank), Kotak Mahindra Bank (Kotak Mahindra Bank), Axis Bank, and Life Insurance Corporation of India hold 11.34% of Yes Bank.

Yes Bank stated that the transaction is subjected to approvals by the Reserve Bank of India (RBI), Competition Commission of India (CCI) and the shareholders of the Bank.

Prashant Kumar, CEO of SMBC, said that the investment was "a pivotal step for our next phase in growth".

Yes Bank reported that JPMorgan and Jefferies were the financial advisors for SMBC.

This week, it was reported that SMBC had reached an agreement with Yes Bank on the acquisition of a stake. The central bank had also verbally approved this deal.

The shares of Yes Bank have gained nearly 10% this year. $1 = 85.3990 Indian rupees (Reporting and editing by David Goodwin and David Evans in Tokyo and Siddhi Nyak in Mumbai)

(source: Reuters)