Citigroup Inc said on Wednesday it has signed an agreement to acquire all of Nikko Cordial Corp, Japan's third-largest brokerage, paying about $4.6 billion for the 32 percent it does not already own.
Nikko shareholders would receive 1,700 yen (US$14.74) of Citigroup shares for each share they own, valuing the additional stake at about 530 billion yen. The agreement was announced four weeks after Citigroup revealed plans to buy the added stake.
Citigroup is one of many foreign banks hoping to add business in the world's second-largest economy, whose consumers have an estimated $13 trillion of financial assets.
Nikko is Citigroup Chief Executive Charles Prince's biggest purchase since he took over the largest U.S. bank in October 2003. It is also Citigroup's largest Asian acquisition, and will give it full control of more than 100 Nikko brokerage offices.
Prince wants Citigroup to generate 60 percent of its business internationally, up from nearly half now. On October 15, he called Nikko something where we can show how we combine with strong, local institutions to grow our international franchise.
The exchange of Citigroup shares for Nikko shares would take effect on January 29, pending approval by Nikko shareholders at a meeting scheduled for December 19. Nikko would not declare a fourth-quarter dividend.
Earlier this year, Citigroup spent about $8 billion to buy 68 percent of Nikko. It had then offered 1,700 yen per share through a tender offer.
The purchase came after Nikko suffered an accounting scandal that hurt business at its Nikko Cordial Securities retail unit and Nikko Citigroup Ltd investment banking joint venture.
Citigroup itself is trying to rebound from a 2004 scandal that led Japanese regulators to close its private bank after a breakdown in internal controls.
The company's Japanese operations posted net income of $6 million from January to September on revenue of $3.58 billion.
Earnings in Japan have suffered, particularly in consumer finance, from rising credit losses and laws that cut the maximum interest rates on loans. Citigroup has projected a full-year net loss from Japanese consumer finance.
On October 29, Citigroup said it had won regulatory approval to list its own shares in Tokyo on November 5.
(US$1 = 115.3 yen)