Citigroup to buyout Nikko in $4.6 billion deal

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Citigroup spent about $8 billion to buy a 68 percent stake in Japan's third-largest securities firm earlier this year, its biggest-ever Asian acquisition.

Since then, the U.S. bank has been increasing its retail presence in Japan and looking to repair its image after it fell foul of Japanese regulators.

Citigroup, the largest U.S. bank by market value, said it would offer its own shares to buy the remaining 32 percent it does not own in what may be the first use of a new law in Japan allowing share swaps in takeover deals.

Citigroup is one of several foreign banks and other financial firms, such as London-based HSBC Holdings, looking to target Japan's millions of wealthy individuals and the country's estimated $13 trillion in household financial assets.

Citigroup is also expanding its Japanese retail bank branch network and making efforts to repair its image, which was tarnished when regulators shut down its private banking operation three years ago.

Nikko has also had problems, thanks to an accounting scandal, but a Japanese fund manager welcomed Citigroup's purchase and said it could help invigorate Japan's financial sector.

"This is no small event. Foreign capital has ventured into the Japanese financial sector in other forms before but this is one of Japan's big three brokerages," said Toru Kitani, senior investment manager at Sompo Japan Asset Management.

"In the midst of all this talk of foreign houses losing interest in Japan, moving their headquarters to Singapore and the like, it is a major commitment to the market and will spur expectations of further realignment in the financial sector," Kitani said.

Citigroup said it would list its shares in Tokyo ahead of the deal, which it said would be neutral to earnings per share in 2008.

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