Bloomberg News
NEW YORK - Citigroup Inc., the biggest U.S. financial services company, said it will double its stake in Nikko Securities Co. to 20 percent as it benefits from a rebound in profit at the Japanese brokerage.
Citigroup will increase its current 9.5 percent stake by exchanging a portion of convertible bonds it holds into the broker's shares by the end of the month, said a spokeswoman. The bonds convert into shares that are worth about 15 percent of Nikko common stock. The Japanese brokerage will then buy the remaining 5 percent of the bonds Citigroup owns.
A 20 percent stake in Nikko, which has operated a joint venture in Japan since 1998 with Citigroup's investment bank Salomon Smith Barney Inc., enables Citigroup to include Nikko's earnings in its own, according to Nikkei English News, which earlier reported the story.
Nikko has a total market capitalization of about $21.6 billion, so a 20 percent stake is worth about $4.32 billion. Earnings have rebounded as Japanese stock indexes and trading have soared as investors anticipate a rebound from the country's decade-long economic slump.
The investment banking joint venture owned by the two companies, Nikko Salomon Smith Barney Ltd., is leading Oracle Corp. Japan's $8.8 billion stock sale, expected to be the country's second-biggest public offering ever. The Japanese affiliate of the world's No. 1 database software maker is selling 250,000 new and 9.45 million existing shares to list on the Tokyo Stock Exchange.
Salomon Brothers International Ltd., a Citigroup company, is leading the non-Japanese portion of the sale.
