Banking behemoth Citigroup will be selling its Japanese domestic securities business to Sumitomo Mitsui Banking Corp.
Banking behemoth Citigroup will be selling its Japanese domestic securities business to Sumitomo Mitsui Banking Corp in a deal valued at USD 7.9 billion, a move that will bolster the American entity's equity by USD 2.5 billion.
The sale would give a boost for Citi, as the firm awaits the results of the stress tests conducted by the US. Recent media reports suggested that the Federal government has asked the entity to raise additional capital.
Citi in a statement said it has struck a definitive agreement to sell its Japanese domestic securities business, conducted principally through Nikko Cordial Securities Inc, to SMBC for 774.5 billion yen (about USD 7.9 billion).
"The transaction is expected to generate approximately USD 2.5 billion of tangible common equity for Citi at closing, with Citi expected to recognise an after-tax loss of approximately USD 0.2 billion," the statement said.
SMBC is a member of Sumitomo Mitsui Financial Group (SMFG).
In connection with the deal, Citi and SMFG would enter into an agreement to provide SMFG with access to Citi's global networks in corporate and investment banking, including M&A and sales and trading services.
According to Citi, the cash value of the transaction includes the purchase price for the transferred business of 545 billion yen and the estimated purchase price for certain Japanese-listed equity securities held by Citi of 28.5 billion yen, among others.
The deal is expected to close by the end of the fourth quarter of 2009, subject to regulatory approvals and customary closing conditions.
"All of the operations and personnel of Nikko Cordial Securities and various other group companies (including Nikko Systems Solutions Ltd and Nikko Business Systems Co, Ltd), together with some of the operations and personnel of Nikko Citigroup Ltd (including its domestic equity and debt underwriting business), will be transferred to SMBC as part of the transaction," the statement noted.
Citi's ownership interests in Nikko Citigroup Ltd, Nikko Asset Management Co, and Nikko Principal Investments Japan Ltd are not included in the transaction.
"This transaction is another step in the execution of the Citicorp/Citi Holdings strategy we announced earlier this year."
"We will continue to look for additional opportunities to maximise the value of businesses and assets as we rationalise and restructure Citi Holdings," Citi CEO Vikram Pandit said.
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