Yesterday Citigroup announced a ¥1,350 per share, $10.8 billion takeover bid for Nikko Cordial, Japan's third largest brokerage. However, a chief investment officer at Harris Associates, Nikko's largest shareholder with about a 7.5% stake, says he values Nikko at over ¥2,000/share in the long-term. The CIO comments, "We welcome Citigroup's involvement but certainly not at that price." Ordinary shares of Nikko gained 1.27% to ¥1,357 ($11.65 at ¥116.5/$1) today, trading as high as ¥1,380 (+3%). Nikko's pink sheet ADRs traded up 15% to $12.00 yesterday. Nikko's four largest shareholders are foreign institutions according to Bloomberg, owning a combined 26% stake, not including Citi's 4.9% stake. Reuters reports analysts say Citi's bid 'looks just sweet enough to convince investors in the Japanese brokerage to sell.' A JP Morgan analyst says, "The tender offer price represents almost no premium over fair value under current market conditions, but we consider it fair for shareholders because the stock could have declined sharply if Citigroup had not come up with the tender offer and the TSE decided to delist the stock [a decision is expected this Friday]."
Sources: Bloomberg [I, II], Reuters
Commentary: Citigroup Bids $10.8 Billion for Nikko Cordial • Nikko Cordial: Citigroup to Launch Bid for Majority of Shares • Citigroup: Japan Expansion and M&A Could Bring Tokyo Exchange Listing
Stocks/ETFs to watch: Citigroup (NYSE:C), Nikko Cordial (OTC:NIKOY), Mizuho Financial Group (NYSE:MFG). Competitors: Mitsubishi UFJ Financial Group (NYSE:MTU), ABN Amro Holding N.V. (ABN), Nomura Holdings (NYSE:NMR). ETFs: iShares S&P Global Financial Index Fund (NYSEARCA:IXG), iShares Dow Jones US Financial Services (NYSEARCA:IYG), Financial Select Sector SPDR (NYSEARCA:XLF)
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