Citigroup's $31 billion deal to buy Associates First Capital Corp. appears to be driven by a vision shared by John S. Reed - its ex-chief executive - that revenues would multiply by selling products to a burgeoning middle-class population overseas.

Buying Associates would substantially boost Citi's retail business in what executives described as a key market, Japan. In a conference call announcing the deal Wednesday, Citi chairman and chief executive officer Sanford I. Weill said he has been keen on expanding in Japan since June 1998, when Travelers Group put up $1.6 billion for a 25% stake in Nikko Securities Co., at the time Japan's third-largest brokerage firm.

The companies formed an alliance, Nikko Salomon Smith Barney. It was a gutsy bet on a rebound in the Japanese economy. That same year Travelers merged with Citicorp, inheriting yet another foothold in Japan. Citi has been building a branch presence in that country for the last decade.

Nikko has 125 branches in Japan. Salomon Smith Barney was already involved in sales ventures through the retail network, peddling specialized brokerage wrap accounts. But the new Nikko Salomon Smith Barney would also combine the two firms' investment banking operations and open the doors for Salomon to underwrite stock and bond issues for Japanese companies and advise on mergers and acquisitions.

With investment banking and corporate banking already humming in Japan, the addition of Associates would "round out a diverse franchise," said Robert I. Lipp, vice chairman and head of global consumer banking at Citi.

"What this is doing is extending the tradition," said David Berry, director of research at Keefe, Bruyette, & Woods. "International-consumer has been a real focus for Citi since the Reed days. The difference now is that the company is a lot more prone to deals."

The dealmaking is likely to continue. Associates, which began with one start-up branch office in Japan in 1979, now has 677 thanks to internal growth and acquisition. This year alone the Irving, Tex., consumer finance firm completed three deals in Japan, the largest one being the June purchase of $375 million of receivables from Chiyoto Trust. Pretax profits from selling personal and home equity loans in Japan make up almost 47% of revenues from international operations at Associates, the company said.

Keith Hughes, Associates' CEO who will become vice chairman of Citi, and Roy Guthrie, Associates' finance chief, said the company would likely continue building in Japan by acquisition.

The deal raises Citi's profile in other key foreign markets. In Canada, for example, Associates has the largest branch network - 326 offices that primarily sell personal and home equity loans. Citi exited Canada last year, citing lack of scale. In the United Kingdom, Associates has $600 million of card receivables, an area where Citi is seen as relatively weak. "This immediately puts us in a good position there," Mr. Lipp said.

Meanwhile, CitiFinancial, the unit that would absorb Associates after completion of the deal, has been expanding by acquisition at home and abroad. It bought 200 branches - some of them from Associates - in the United States, and it bought consumer finance companies in Chile and Argentina and formed a joint venture with one in Mexico.

Citi said in its 1999 annual report that it was focusing on growing consumer finance operations in Eastern Europe and Latin America, two areas where there is a budding population of middle-market customers.

Having a bigger presence in Japan would help solve one of Citi's dilemmas. Like some other U.S. financial institutions, it was flooded with new deposits after the 1997 and 1998 Asian financial crisis, so much so that "we have more deposits than we know what to do with" in Japan, Mr. Weill said. Those deposits could be put to use funding new consumer loans to be made through the Associates branches.

"This will be a big plus," Mr. Weill said.

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