Citigroup to Sell Japan Units to Sumitomo Mitsui, Nikkei Says

Citigroup to Sell Japan Units to Sumitomo Mitsui, Nikkei Says


April 28 (Bloomberg) -- Citigroup Inc. will sell most of its Nikko Cordial Securities Inc. and Nikko Citigroup Ltd. businesses in Japan to Sumitomo Mitsui Financial Group Inc. for more than 500 billion yen ($5.2 billion), the Nikkei news service said.

The companies reached a “basic” agreement and will announce the deal by the end of this week, Nikkei reported, without saying where it obtained the information. Citigroup’s Tokyo- based spokesman Yoshito Shimoyama and Chika Togawa, a spokeswoman for Sumitomo Mitsui, both declined to comment.

New York-based Citigroup is selling assets after reporting more than $100 billion of credit losses and writedowns tied to the U.S. subprime-mortgage crisis, according to data compiled by Bloomberg. The U.S. bank paid 1.6 trillion yen for Nikko Cordial Corp., Japan’s third-largest securities firm, in January 2008.

Citigroup selected Sumitomo Mitsui as the preferred buyer after Japan’s second-largest bank by market value outbid rivals, two people with knowledge of the matter said on April 25.

Sumitomo Mitsui rose 1 percent to 3,200 yen as of 2:34 p.m. in Tokyo trading, in line with the 1 percent gain by the 84- company Topix Banks Index.

Citigroup in January put Nikko Cordial on a list of businesses flagged for eventual sale. An internal memo to employees in February said the bank aimed to find partners for Nikko Cordial and other units in Japan, or to sell them in an initial public offering.

Nikko Asset

The U.S. bank is also divesting its Japanese asset- management business, Nikko Asset Management Co., and has invited bids from banks including Mizuho Financial Group Inc., four people familiar with the matter said earlier in April.

The U.S. government channeled $45 billion into Citigroup and agreed to take a 36 percent stake in the bank after it posted five straight quarterly losses. The losing streak ended April 17, when the bank posted a $1.6 billion profit for the first quarter on trading gains and an accounting benefit for companies in distress.

Nikko Cordial, formed in 1944, had 133.6 billion yen of revenue for the nine months ended Dec. 31. The brokerage, with 111 branches in Japan, managed 25 trillion yen in client assets.

Citigroup offered to buy Nikko Cordial in 2007 after the Japanese securities firm was battered by an accounting scandal. Nikko faced possible delisting from the Tokyo Stock Exchange after it was accused in 2006 of padding earnings, resulting in a 30 percent drop in its stock price in the seven weeks ended Feb. 1, 2007.

Tokyo-based Sumitomo Mitsui operates a retail brokerage with 75 branches nationwide.

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