Citigroup Inc. improved its takeover offer for Nikko Cordial Corp. by 26 percent to $13.4 billion after the Japanese brokerage’s biggest investors rejected the previous bid. The decision to up the offer has been taken despite its earlier stance when Citigroup had said that it will not sweeten its bid further. Nikko’s value in fact surged after a decision by Tokyo Stock Exchange not to de-list it over an accounting problem. The decision also rebuffed the speculations and outlined that investors in Japan wouldn’t be forced to sell their shares.
The boards of the two companies have settled to raise the tender offer price to 1,700 yen ($14.40) a share, from last week’s initial 1,350 yen ($11.44) a share offer, revealed by a joint statement. Three of Nikko’s largest shareholders, Harris Associates LP, Orbis Investment Management Ltd. and Southeastern Asset Management Inc., had earlier extended that Nikko is worth at least 2,000 yen and rejected Citigroup’s earlier offer. The dissented group was controlling about 27 percent shares of the company.
Nikko will now provide the New York-based Citigroup more than 100 branches in Japan and an additional 30 trillion yen ($257 billion) of clients’ assets in Asia’s biggest economy. Citigroup, which has been looking for a short cut into the Japanese retail investment market, has explained that the offer had been raised with a view to continue to trade on the Tokyo market and added that Nikko’s outlook was ’significantly improved’. The deal would also mark the biggest foreign acquisition of a Japanese securities company.
On the other hand, senior expert and investors have explained the exchange’s decision to keep Nikko listed as poorly explained and inconsistent with previous delisting decisions. The increased price emphasized the importance Citigroup places on expanding its global business. The bank’s chief executive, Charles Prince, has said he wants to raise the share of Citigroup’s overseas revenue to 60 percent from the present level of 44 percent. The recent take over would help the US based company to achieve that goal since Japan’s stock market is the world’s second largest after the U.S. and its government bond market is the world’s biggest.
