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Thursday, March 15, 2007

Citigroup bid firm at 1,700 yen as Nikko tender offer starts


Staff writer

U.S. financial services giant Citigroup Inc. said Wednesday it will launch a public tender offer for Nikko Cordial Corp. from Thursday through Apr. 26 for 1,700 yen per share -- a price Citigroup said it would not increase.

Citigroup raised its purchasing price to 1,700 yen from its initial bid of 1,350 yen, the day after the Tokyo Stock Exchange made the surprise decision not to delist Nikko Cordial for accounting fraud.

Citigroup wants to make Nikko a subsidiary. It is aiming to get a majority of shares, but says it will buy as many as are offered for sale. Purchasing all available shares would cost Citigroup 1.68 trillion yen, 430 billion yen more than under its initial offer of 1,350 yen per share.

"Our price is firm and we will stay at that price of 1,700 yen, and it will not be increased," Douglas Peterson, CEO for Citibank's Japan unit, told a news conference in Tokyo.

Peterson said Citigroup raised the offer price because the TSE's decision to allow Nikko Cordial to remain listed "significantly improved" the company's outlook.

"We're very pleased with the result of Nikko Cordial continuing to be listed on the Tokyo Stock Exchange," Peterson said.

He said the new price offers about a 33 percent premium to Nikko's average stock price in the past month and a 14 percent premium to the closing price of 1,490 yen on Tuesday.

Investors rushed to buy Nikko shares Wednesday at below the 1,700 yen tender offer price. The shares climbed by a maximum allowable daily gain of 200 yen, or 13.42 percent, closing at 1,690 yen.

As there was speculation that a rival bidder may surface, a clause was included in the agreement between Citigroup and Nikko released Wednesday, stipulating that the brokerage will pay 5 billion yen if it ends the deal to take a better offer.

There is also a nonsolicitation clause prohibiting Nikko from negotiating with any other party that wants to purchase its shares.

The focus now moves to how four foreign investment funds, which have a combined 27 percent of Nikko's shares, will react to the public tender offer. They rejected Citigroup's initial offer and three of them -- Harris Associates LP, Orbis Investment Management Ltd. and Southeastern Asset Management Inc. -- have said the are worth at least 2,000 yen.

So far, the funds have been silent. Citigroup said it had not yet contacted them to persuade them to respond to the bid.

The bid for Nikko could also depend on Mizuho Financial Group Inc., which holds a 4.8 percent stake. Japan's second-largest bank had wanted to acquire Nikko but dropped the plan.

Nikko President Shoji Kuwashima apologized for the firm's accounting fraud in a statement released Wednesday, and said the firm promised to do its utmost to regain customer trust and reinforce governance.



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