Nomura, T&D Among Bidders for Citi's Japan Unit

Investment bank Nomura Holdings and insurer T&D Holdings are among five firms in the second round of bidding for Citigroup's asset management arm in Japan in a deal likely to exceed $1 billion, five sources familiar with the matter said.

Mark Lennihan / AP

Mid-sized Sumitomo Trust and Banking is also bidding for Nikko Asset Management, the sources said, after Citigroup put Japan's third largest fund manager up for sale as part of efforts to recover from heavy losses in the global financial crisis.

Sumitomo Mitsui Financial Group (SMFG) and Mizuho Financial Group are also among the bidders left for Nikko Asset Management, the Nikkei business daily reported.

The sale comes after Citigroup sold Japanese brokerage Nikko Cordial and key investment banking assets to SMFG, the country's third-largest bank, for about $5.9 billion.

Officials from Citigroup , Nomura, which is bidding via its Nomura Asset Management unit, T&D, Sumitomo Mitsui and Sumitomo Trust declined to comment on the deal.

Citigroup is expected to narrow the list of potential buyers to around two and take final bids as early as this month, the sources said.

They declined to be identified as they were not authorized to speak publicly about the deal.

Citigroup spent about 1.5 trillion yen to acquire the Nikko Cordial franchise in a transaction completed early last year, aiming to expand in the world's second-largest economy.

That deal gave it control of Nikko Asset, which lists on its website 8.8 trillion yen of assets under management as of March 2009.

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Industry sources said T&D Holdings and Sumitomo Trust could gain most from buying Nikko Asset, while some questioned how beneficial it would be for Nomura to purchase the company.

"Sumitomo Trust has been in the industry for a long time and a tie-up with Nikko would clearly strengthen their marketing power," an executive of a non-Japanese asset management company said on the condition of anonymity.

"We can understand that T&D as an insurer would want to acquire Nikko Asset in order to increase its lineup of financial products," he said. "Nomura could firm up its position as the top asset company in Japan if it successfully acquired Nikko, but I doubt whether the tie-up could bring a lot of synergy to Nomura considering it already has strong marketing power and a solid network."

Nikko Asset sells its products to retail investors over the counters of Japanese banks, instead of selling them through its group company Nikko Cordial.

Many other asset management companies, like the country's No.1 and No.2 firms, Nomura Asset Management and Daiwa Asset Management, rely heavily on marketing products through brokerages in their groups.

Nikko Asset appeared to have increased its independence after former executives from U.S. asset management company Fidelity were invited to join it in 2004, industry sources said.

Separately, Citigroup also plans to sell Japanese telemarketer Bellsystem24 in a deal that could be worth around $1.5 billion, people familiar with the matter have told Reuters.

Shares of Nomura fell 8.8 percent, while T&D Holdings dropped 5.5 percent, SMFG lost 2.0 percent and Mizuho fell 5.8 percent. The benchmark Nikkei average shed nearly 2.9 percent.

Copyright 2009 Reuters. Click for restrictions.