Citigroup unveiled an increased 13.4-billion-dollar take-over bid for the scandal-tainted Japanese securities firm Nikko Cordial Tuesday in an effort to win over sceptical shareholders.
The US financial giant raised its offer to 1,700 yen per share from 1,350 yen, after several major Nikko Cordial shareholders rebuffed the initial bid valuing the Japanese firm at 1.25 trillion yen (10.7 billion dollars).
The announcement came a day after the Tokyo Stock Exchange said it would not delist Nikko Cordial for accounting irregularities, a decision which Citigroup said "significantly improves" its business outlook.
Citigroup, which holds a 4.9 percent stake in the company, said in a statement it would launch the tender offer for all the outstanding shares in Nikko Cordial "as soon as possible". It said the new bid, which is part of a wider strategic alliance, had been approved by the boards of both companies.
Citigroup is betting that it can succeed where other US banking heavyweights such as Merrill Lynch have failed with the tender offer, which would be one of the largest foreign take-overs of a Japanese firm. Nikko Cordial shares jumped 86 yen or 6.1 percent to 1,490 Tuesday ahead of Citigroup's announcement as investors welcomed the TSE's decision to let the firm keep its stock market listing.
The Osaka Securities Exchange and the Nagoya Stock Exchange also announced Monday that they had decided not to delist Nikko Cordial, providing a further boost to the company's business prospects.
"The supervisory list posting had hurt Nikko Cordial's business, mainly in the area of wholesale operations," Goldman Sachs analyst Takehito Yamanaka wrote in a note to clients. Some institutional investors had suspended the placement of orders while businesses had excluded the company from underwriting syndicates for public offerings, he said. "We believe the TSE's decision will bring an end to such missed opportunities," added Yamanaka.
Even before the bourse's decision several major shareholders, including US fund Harris Associates which owns about 7.5 percent of Nikko Cordial, had said Citigroup's initial bid undervalued the Japanese firm.
Nikko Cordial admitted last December to having falsified its financial statements for the fiscal years that ended in March 2005 and March 2006, inflating its profits by 21 billion yen.
A panel of outside experts tapped by Nikko reported in January that former executives had been "actively involved" in the systematic violation of laws and had inflated profits for the year to March 2005. Japan's financial authority imposed its largest-ever fine of 500 million yen on Nikko Cordial in early January for issuing the false earnings report. The chairman and president of Nikko Cordial stepped down in late December to take responsibility for the improper accounting practices.