MITSUBISHI UFJ Group (MUFG) is set to take 100 per cent control of Union Bank of California in a $3.5 billion takeover that would mark the second-largest overseas acquisition by a Japanese financial institution this year.

The move comes after Union Bank shareholders forced MUFG to raise its offer price. MUFG said it had won the approval of the Union Bank board after it sweetened its offer by about 17 per cent to $73.50 a share from an initial $58 a share, valuing the 25th-largest bank in the US at about $10.1 billion.

The increased offer will cost MUFG $500 million more. The deal also shows the growing ambitions of Japanese banks and insurance companies to expand their overseas operations amid a declining domestic market.

MUFG has expressed a desire to expand its operations in the US, where it is seeking financial holding company status, which would allow it to move into investment banking. It is also keen to expand in China.

The deal is the financial sector's largest outside Japan this year other than Tokio Marine's $4.7 billion acquisition of Philadelphia, the US non-life insurance company, and the fourth-largest outbound Japanese merger and acquisition deal this year, according to Dealogic.

It takes the value of Japanese acquisitions of overseas com-panies to $40.2 billion, up 73 per cent compared with the value of all outbound Japanese MA deals last year, Dealogic says.

Japanese financial institutions, which have spent years cleaning up their balance sheets, are well capitalised compared with their western counterparts and are being approached by overseas financial institutions seeking investors.

Mizuho, Japan's second-largest bank, has invested $1.2 billion in Merrill Lynch, while Sumitomo Mitsui has invested $1 billion in Barclays.

The new offer, which is a 26 per cent premium to Union Bank's closing price the day before MUFG's initial offer, values Union Bank at 2.3 times book value. It is considered relatively expensive by analysts.

Masaaki Tanaka, Union Bank's chief executive, is an ambitious high-flyer in Mitsubishi in contrast to most self-effacing Japanese executives.

His office bears photographs of him with personalities such as Junichiro ­Koizumi, former prime minister.

- (Financial Times service)