Citigroup offers to buy Japanese brokerage Nikko Cordial for $10.8 billion
By Our Corporate Bureau | 06 Mar 2007
Mumbai: Citigroup Inc has offered to acquire Japanese brokerage Nikko Cordial Corp for $10.8 billion (1.25 trillion yen) in its biggest takeover bid in Asia and the largest since Charles Prince took over as chief executive in 2003.
Citigroup, the biggest US banking group, which currently owns 4.9 per cent of Nikko Cordial, its investment-banking partner, bid 1,350 yen a share for the rest of the Tokyo-based company.
The offer is 35 per cent more than the accounting scandal-hit Nikko Cordial's stock price at the start of February.
Nikko Cordial has 109 branches, 30 trillion yen of client assets and about 12,000 employees in Japan. While the acquisition would add to Citygroup's clout in the world's second largest economy, a deal would also end concerns about the future of Nikko Cordial.
The brokerage, which is facing delisting by the Tokyo Stock Exchange because of bad accounting, has already lost six of its top executives who quit in December.
In its restated earnings, Nikko Cordial reported a net income of 88 billion yen for the year ended March 2006 against the earlier figure of 96.4 billion yen.
An independent panel has indicted Nikko Cordial's former chief financial officer, Hajime Yamamoto for ignoring repeated warnings by the company's audit committee about accounting methods in late 2004 and early 2005.
Nikko Cordial has sued Yamamoto, as well as former CEO Junichi Arimura and former chairman of Nikko Principal Investments Japan Ltd, Hirofumi Hirano for recovery of 3.1 billion yen as compensation for accounting- related losses.
Citigroup itself has suffered setbacks in Japan with regulators ordering closure of the company's local private bank for failing to check fraud and money laundering. Citigroup also closed about 80 per cent of its consumer-finance outlets in the country after new laws capped the interest rate non-bank lenders may charge.
Citigroup said the deal is conditional on it getting a majority stake of at least 50.1 per cent of Nikko Cordial's shares.