Citigroup tries again in Japan
Citigroup announced that it would buy Nikko Cordial, the #3 stockbroker in Japan. The deal might reach $11 billion if the first offer is accepted. It's part of Citigroup's new attempt to expand in Asia.
But what's interesting about this story is the reversal in thinking at Citigroup. The company bought a 20% stake in Nikko Cordial in 1998, but in 2004 started selling off some of its holdings, reducing them to 4.9% But suddenly it wants to build its share back up to a majority holding.
Meanwhile, Nikko has been in deep trouble with Japanese official due to fraudulent financial reporting and possible fraud, and it is under threat of being de-listed form the Tokyo stock exchange resulting in a falling credit rating. Major stockholders, many of whom are non-Japanese investment groups, are talking tough about rejecting the Citigroup bid, but a Citigroup takeover may be preferable to holding on to a de-listed firm.
Citigroup has had an on-again off-again flirtation with Japanese financial industry, even though it established banking in Japan over a century ago. In 2004, regulators closed its Japanese private banking operation because of poor financial controls by the local mangers. That's when Citigroup started to sell its Nikko Cordial shares.
If successful, the buyout would be the biggest takeover of a Japanese company by a foreign one. For Citigroup, it would be the biggest deal it spent $12.5 billion in 2001 to buy Mexico's Grupo Financiero Banamex-Accival.
Meanwhile Citigroup is apparently moving to buy a Taiwanese bank, the Bank of Overseas Chinese for $424 million. In 2004, Citigroup bought South Korea's KorAm Bank for $2.9 billion.
