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Mitsubishi UFJ group to buy $172 mln Challenger stake

Mon Aug 27, 2007 12:42am EDT

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(Recasts, adds details, share price)

SYDNEY, Aug 27 (Reuters) - Japan's Mitsubishi UFJ Financial Group Ltd (8306.T) has agreed to buy A$208 million ($172 million) stake in Australian billionaire James Packer's Challenger Financial Services Group Ltd (CGF.AX), to help Challenger with its Asian growth.

Challenger said on Monday that Bank of Tokyo-Mitsubishi UFJ and Mitsubishi UFJ Securities 8615.T would subscribe for a total of 40 million new Challenger shares at A$5.20 per share for A$208 million ($172 million).

Challenger shares jumped as much as 8.8 percent to A$5.44 outpacing a 1.7 percent rise in the benchmark S&P/ASX 200 Index. By 0009 GMT, Challenger was up 5.2 percent, while Mitsubishi UFJ Financial shares rose 2.7 percent.

The two Japanese financial institutions would hold just over 5 percent stake in Challenger after the issue of new shares, which are being offered at a 4 percent premium over Challenger's close last week.

Challenger also entered into a strategic relationship with Colony Capital to develop opportunities in the United States, Europe and Asia.

Colony has acquired an option to buy over 57.1 million shares in Challenger, exercisable over a five-year period at A$7.00 each. Colony will pay A$64 million for the grant of option.

Colony Capital, a global firm focusing on real estate investments, was advised by Credit Suisse Australia, while Deutsche Bank AG advised Challenger.

Challenger also reported a 90 percent increase in its fiscal 2007 profit to A$225 million, boosted by a 27 percent rise in its assets under management to A$52.8 billion.

($1=A$1.21)

((Reporting by Denny Thomas; denny.thomas@reuters.com; Reuters Messaging: denny.thomas.reuters.com@reuters.net; +612 9373 1812)) Keywords: CHALLENGER TOKYO/

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