Citigroup Inc. increased its takeover offer for Nikko Cordial Corp. by 26%, to $13.4 billion, after the Japanese brokerage's four biggest shareholders rejected an earlier bid.
The $1.88 trillion-asset New York company made its proposal a day after the Tokyo Stock Exchange declined to delist Nikko over an accounting fraud, meaning investors in Japan could not be forced to sell.
Citi owns 5% of Nikko, and buying the brokerage outright would give it control of more than 100 branches in Japan and an additional $257 billion of assets in Asia's biggest economy. The two companies already have an investment banking joint venture in Tokyo for share sales and providing merger advice.
Nikko's four biggest shareholders — Harris Associates LP of Chicago, Orbis Investment Management Ltd. of Bermuda, Southeastern Asset Management Inc. of Memphis, and Mackenzie Financial Corp. of Toronto — rejected Citi's initial offer. Harris, Orbis, and Southeastern have said Nikko is worth at least $16.94 a share. Together, the four companies control about 25% of Nikko.
Revelations that former Nikko executives inflated profits in 2004 left the company in disarray and gave Citi an opportunity to jump-start its expansion in Japan by buying the rest of the company. Regulators shut Citi's private bank in Japan in 2004, because it failed to comply with money-laundering rules.
Citi raised the offer price as the outlook for Nikko improved, the two companies said in a joint statement Tuesday to the Tokyo exchange.
Charles Prince, Citi's chief executive, is focusing on Asia, where economies are growing faster than in Europe and the United States, swelling the ranks of the middle class. The company is planning takeovers in Asia rather than Europe, Mr. Prince said in an interview the Frankfurter Allgemeine Zeitung published Tuesday.
Citibank is poised to buy Taiwan's Bank of Overseas Chinese, the island's top financial regulator, Hu Sheng-cheng, said Tuesday. Citigroup has been in talks with the Taiwan bank since July. Mr. Prince has said he wants to generate more than 60% of earnings overseas, compared with 45% last year.
The bid for Nikko may depend on Mizuho Financial Group Inc., which holds 4.8% of Nikko. Japan's second-largest banking company dropped a plan to buy Nikko and is seeking an investment banking alliance with Citi instead, two company officials said last month.
Masako Shiono, a Mizuho spokeswoman, was not available for comment. She said this week that the company is still considering whether to sell its stake.
