SMBC Group will provide Jefferies with a $1.65 billion revolving credit facility and a $250 million loan to bolster its lending capabilities. The Japanese banking giant also plans to buy as much as a 4.9% stake in Jefferies in the public markets, representing an equity investment of roughly $400 million.
The two companies will work together to pursue growth opportunities in corporate and investment banking, with a focus on cross-border mergers and acquisitions involving Japanese businesses.
"We view the alliance as the beginning of a long-term relationship with SMBC Group, and we look forward to many years of partnering on many aspects of our respective businesses to best serve our clients," Jefferies CEO Rich Handler and President Brian Friedman said in a press release.
Jefferies is obtaining valuable expansion capital and relationships with potential Japanese partners, while SMBC Group is accelerating its expansion in the U.S. Taking a direct stake in Jefferies is also part of SMBC Group's strategy to broaden its investments by diversifying into more international markets. Both companies stand to benefit from the deal, which is why investors bid up Jefferies' shares today.