Sumitomo Mitsui Banking Corporation to acquire New Nikko Securities

Citigroup, Inc., a US-based diversified financial services company, through its wholly-owned subsidiary Nikko Citi Holdings, Inc, has reached an agreement to sell all shares in New Nikko Securities to Sumitomo Mitsui Banking Corporation (SMBC) in an all cash transaction valued at JPY7,74,500 million ($7,907.32 million). All the parties are based in Japan except Citigroup.

SMBC is a financial institution mainly engaged in the banking business. New Nikko Securities will succeed to all operations of Nikko Cordial Securities, Inc., a securities brokerage firm, and some businesses including the domestic debt and equity underwriting and other businesses of Nikko Citigroup Limited, a wholesale securities business firm.

The cash value is comprised of the purchase price for the transferred business of JPY5,45,000 million ($5,564.22 million), the estimated purchase price for certain Japanese-listed equity securities held by Citigroup of JPY28,500 million ($290.97 million), and JPY2,01,000 million ($2,052.12 million) of cash derived either through the retention of excess cash in Nikko Cordial Securities or repayment of its outstanding indebtedness to Citigroup.

All of the operations and personnel of Nikko Cordial Securities and various other group companies (including Nikko Systems Solutions, Ltd. and Nikko Business Systems Co., Ltd.), together with some of the operations and personnel of Nikko Citigroup Limited (including its domestic equity and debt underwriting business), will be transferred to SMBC as part of the transaction. Citigroup's ownership interests in Nikko Citigroup Limited, Nikko Asset Management Co., Ltd., and Nikko Principal Investments Japan Ltd. are not included in the transaction. The transaction is expected to close by the end of the fourth quarter of 2009.

In connection with the transaction, Citigroup and Sumitomo Mitsui Financial Group (SMFG) have agreed to enter into an alliance agreement to provide SMFG with access to Citigroup's global networks in corporate and investment banking, including M&A and sales and trading services, while continuing the partnership between Citigroup and Nikko Cordial Securities in originating and distributing capital markets products to investors in Japan and globally.

Update on April 26, 2009:

According to The Wall Street Journal, SMFG, a Japan-based provider of banking and financial services, has emerged as the frontrunner to acquire Nikko Cordial Securities from Citigroup.

Reportedly, SMFG has submitted a highest bid valued at JPY500,000 million ($5,148.40 million).

Rumor (February 12, 2009):

According to Reuters, the Sankei newspaper reported that SMFG and Daiwa Securities Group, Inc. are planning to make a joint bid to acquire Nikko Cordial Securities from Citigroup. The transaction is valued between JPY300,000 million ($3,323.5 million) and JPY500,000 million ($5,539.25 million).

Daiwa Securities Group is a Japan-based provider of financial services.

Reportedly, Mitsubishi UFJ Financial Group and Mizuho Financial have also expressed interest in acquiring Nikko Cordial Securities.

Institutional Clients Group is acting as financial advisor to Citigroup and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to SMBC on this transaction.

Deal Value (US$ Million) 7907.32
Deal Type                Acquisition
Sub-Category             100% Acquisition
Deal Status              Announced: 2009-05-01

Deal Participants

Target (Company)   New Nikko Securities
Acquirer (Company) Sumitomo Mitsui Banking Corporation
Vendor (Company)   Nikko Citi Holdings, Inc.

Deal Rationale

The transaction would enable SMFG to expand its retail brokerage business. SMFG will benefit from Citigroup's global banking platform and international network. Citigroup plans to sell Nikko Cordial Securities, as part of a plan to shed non-core assets and return to profitability.

Related terms: acquisition, advisor, banking, business, corporate, debt, equity, financial services, investment banking, japan, legal, newspaper, products, retail, sales, securities, wholesale