By Takahiko Hyuga/Bloomberg
Tokyo: Citigroup Inc., the world’s biggest financial services company, said it will borrow money from a group of Japanese banks to help fund its $13.4 billion (Rs57,218 crore) takeover bid for Nikko Cordial Corp.
Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc., Citigroup’s banking unit and others will arrange 1.7 trillion yen ($14.3 billion) of loans, the Nikkei newspaper reported earlier on6 April.
“This yen loan facility, which is for general corporate purposes, is part of Citigroup’s global borrowing program,” said Atsuko Yoshitsugu, a Tokyo-based spokeswoman at Citigroup. “It will help us better match the currency requirements of the recently announced Nikko Cordial transaction.”
Citigroup, which owns a 4.9% stake in Nikko, said last month it was bidding for control of Japan’s third-largest securities firm, with which it has an investment banking partnership in the country. Mizuho, which holds 4.8% of Nikko, said it will tender the shares to Citigroup.
The commitment line of credit is for one year, and can be extended for a further 12 months, the newspaper reported. The banks will provide 1.4 trillion yen, with an option to lend 300 billion yen more to Citigroup, according to the report.
Citigroup, which is cash-rich and has little need to borrow funds externally, is making this commitment line because it needs to raise yen for the acquisition and can avoid exchange-rate fluctuations, the report said.
Four Nikko shareholders that own a combined stake of about 25% are pressuring Citigroup to raise its $13.4 billion offer, which the New York-based bank has said is final.
Three of them -- Southeastern Asset Management Inc., a Memphis-based money manager, Orbis Investment Management Ltd. and Harris Associates LP -- have placed sell orders on the Tokyo Stock Exchange offering Nikko stock for 1,900 yen a share, above Citigroup’s 1,700 yen bid.
Tokyo exchange rules state that the number of buy orders must match sell offers before trading. The orders placed at 1,900 yen won’t be traded unless a buyer appears at that price.