UPDATE 2-Daiwa to buyout SMFG from banking venture-Nikkei

Thu Sep 3, 2009 6:47pm EDT

*Daiwa, SMFG in talks to end investment banking JV-Nikkei

*Daiwa to spend 200 bln yen to buy SMFG's stake in JV

*Deal triggered by SMFG's purchase of Citi banking assets (Adds Daiwa no comment, background, dateline)

TOKYO, Sept 4 (Reuters) - Japan's Daiwa Securities Group (8601.T) may spend about $2.2 billion to buy Sumitomo Mitsui Financial Group's (8316.T) stake in their investment banking joint venture, the Nikkei business daily reported on Friday.

Daiwa and Sumitomo Mitsui (SMFG) have an investment banking venture called Daiwa Securities SMBC. Daiwa Securities, Japan's No. 2 brokerage, owns 60 percent of the venture, while SMFG, Japan's third-largest bank, owns the rest.

The fate of the venture has been in doubt after SMFG agreed earlier this year to buy Citigroup's (C.N) brokerage and key investment banking operations in Japan, including businesses that overlap with Daiwa Securities SMBC. [ID:nBNG446757]

Daiwa and SMFG are in final talks to end the venture, the Nikkei said. Daiwa will likely pay about 200 billion yen ($2.2 billion) for SMFG's stake, making it a wholly-owned subsidiary, the newspaper said.

A spokesman for Daiwa declined to comment. No one at SMFG was immediately available for comment.

However, even after the new deal, Sumitomo Mitsui will continue to be Daiwa's main lender, and their loans and other transactions will remain in place, the Nikkei said.

The companies are in talks to see if Sumitomo Mitsui could lend about 100 billion yen to Daiwa to help it finance the buyout, the paper said. (Reporting by Anurag Kotoky in Bangalore and Nathan Layne in Tokyo ; Editing by Maju Samuel, Leslie Gevirtz)

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