Daiwa to buy out SMFG from venture for $2.2 billion

By Junko Fujita

TOKYO (Reuters) - Daiwa Securities Group (8601.T) said it would pay about $2.2 billion to buy out Sumitomo Mitsui Financial Group (8316.T) from their investment banking joint venture, leaving Daiwa vulnerable amid intensifying competition for deals in Japan.

Daiwa, Japan's second-largest brokerage, said it would likely pay about 200 billion yen ($2.2 billion) to buy SMFG's 40 percent stake in their 10-year old venture, Daiwa Securities SMBC, making it a wholly owned subsidiary.

The deal was widely expected after reports by Thomson Reuters and other media last week.

The fate of the partnership had been in doubt since SMFG agreed earlier this year to buy Citigroup's (C.N) brokerage and securities underwriting operations in Japan for about $6 billion, some of which overlapped with the Daiwa venture.

SMFG had been in talks with Daiwa to take a majority stake in the venture with the aim of then merging its operations with the wholesale businesses bought from Citigroup, but Daiwa resisted losing control and the negotiations fell apart.

Daiwa Securities CEO Shigeharu Suzuki told a new conference the impact on earnings of cutting ties with SMFG would be limited.

"We were doing business alone until 11 years ago, before we made the tie-up, and it was Daiwa Securities that was leading this venture," Suzuki said.

"So I'm sure we will do well in our business in the future. I'm confident about it."