Sumitomo Mitsui, Citigroup reach deal on brokerage
TOKYO — Sumitomo Mitsui is taking over Citigroup’s Japan brokerage businesses, both sides said Friday, as part of a bigger plan to restructure the struggling U.S. bank.
Sumitomo Mitsui Financial Group Inc. will acquire Nikko Cordial Securities Inc. and some parts of Nikko Citigroup’s Japan operations for about 545 billion yen ($5.6 billion), company officials said.
Details will be announced by executives at a news conference at a Tokyo hotel later in the day, they said. The deal, to be completed between October and December this year, also includes a cash transfer related to assets of the brokerage totaling some 21 billion yen, they said.
The much-expected move, which also includes the purchase of most of Nikko Citigroup’s securities operations, is part of the ailing U.S. bank’s global restructuring. Citigroup has said it is looking into selling its Japan brokerage operations.
The deal makes Sumitomo Mitsui the first Japanese bank to buy a top brokerage in Japan.
Two other of Japan’s “megabanks” — Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. — had also been wooing Nikko Cordial. But they lost out in the end.
Nikko Cordial, which Citigroup acquired just a year ago, is Japan’s third-largest brokerage with managed assets of 25 billion yen ($260.4 million) and 111 branches.
Sumitomo Mitsui can hope to expand its brokerage operations by acquiring Nikko Cordial, which operates in both individual and corporate sectors in Japan. The acquisition will allow Sumitomo Mitsui to come close in size to the nation’s industry leader Nomura Holdings.
The acquisition will not include some operations in Nikko Citigroup’s securities business, Nikko Asset Management and other units, it said, and is an effort to best streamline the efficiency of Citigroup’s overall business.
After reporting a quarterly loss of $8.29 billion, Citigroup last month reorganized into two entities, Citicorp and Citi Holdings. The first is focused on traditional banking around the world, while the second holds the company’s riskier assets and tougher-to-manage noncore ventures, including Nikko Cordial.
Analysts have said that CEO Vikram Pandit’s reorganization allows Citigroup to sell or spin off the Citi Holdings assets to raise cash.
Citigroup has already begun scaling back its presence in Japan to cope with the global financial crisis. In December, it agreed to sell NikkoCiti Trust and Banking Corp. to Mitsubishi UFJ Trust and Banking Corp. in an all-cash deal worth 25 billion yen.
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