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Citigroup: No Plans to Sweeten Nikko Bid

Citigroup said on Monday that it had no plans to alter the terms of its $10.8 billion bid for Nikko Cordial even after a surprise decision by the Tokyo Stock Exchange to not delist the brokerage.

Citigroup last Tuesday announced its intention to acquire Nikko in what would be its biggest-ever deal in Asia.

The U.S. financial conglomerate had said it would launch a tender offer bid for all shares in Nikko at 1,350 yen regardless of whether it lost its stock listing.

"This remains true," Citigroup said in a statement, commenting on the terms of its offer.

The decision by the TSE on Monday to let Nikko keep its listing came as a surprise to investors following numerous Japanese media reports that bourse officials had decided informally to kick the company off its trading rolls.

A group of investors that own 25% of Nikko's stock have complained that Citigroup's offer undervalues the firm by at least a third.

Holding Out for More

Investors hoping for a better deal have kept Nikko's shares above Citigroup's offer price since the U.S. banking group unveiled its informal bid last Tuesday. Citigroup said at the time it would initiate a formal tender offer within a week.

On the weekend, Orbis Investment Management became the latest of the funds to object, calling Citigroup's offer "unacceptable" in a statement released late Saturday.

Orbis said it holds about 6.9% of the outstanding stock, which according to Reuters data would make it the second largest shareholder.

Three other major shareholders have also objected to the Citigroup's price: Canadian investment group Mackenzie Financial, Tennessee-based Southeastern Asset Management, and top shareholder Harris Associates of Chicago.

However, the Financial Times reports that Citigroup could have effective control over Nikko’s core business even it failed to win shareholder support for its bid for the Japanese broker, the tender offer document will show this week.

The document will reveal the details of agreements between Citigroup and Nikko designed to safeguard Citigroup’s interest in the companies’ investment banking joint venture, according to people close to the companies.

Orbis, Southeastern and Harris say they value Nikko at 2,000 yen a share, while Mackenzie puts Nikko's worth at 1,700-1,800 yen a share, according to Japan's Nikkei business daily.

Some analysts, though, have said shareholders may choose to sell rather than risk Citigroup walking away at a difficult time for Nikko, which risks losing its stock listing over an accounting scandal.

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