U.S. News

Orbis Places Sell Order for Nikko Shares Above Citigroup's Bid Offer

Reuters
WATCH LIVE

A major shareholder of No. 3 Japanese brokerage Nikko Cordial said it will immediately place an order on the Tokyo Stock Exchange to sell all its 56.5 million Nikko shares at 1,900 yen per share.

Orbis Investment Management said it believes that Citigroup's offer of 1,700 yen per share for Nikko materially undervalues the company. Nikko shares closed on Monday at 1,685 yen.

In a statement, Orbis said that offers by any other shareholders who share its view and follow its example "will be visible to the market in the order book of the Tokyo Stock Exchange." Orbis added: "This open format permits the marketplace to decide what the shares are worth."

Last month, Citigroup began accepting tenders for its roughly $14 billion takeover bid for Nikko at 1,700 yen per share and said it would not increase its bid a second time. Its original offer valued Nikko at 1,350 yen per share.

Citigroup raised its bid price after Nikko escaped a possible delisting by the Tokyo Stock Exchange over an accounting scandal. The stock's continued listing weakened the U.S. bank's leverage against North American investors, who had dismissed its offer as too low.

Orbis said it is concerned "that the process which led to the Citigroup tender offer was not conducted in an open and transparent manner that would allow the market a full opportunity to determine the true value of Nikko Cordial."

Citigroup declined to comment, while its shares were down about 1.5% at $50.58.

Bermuda-based Orbis said its actions further its fiduciary responsibilities to clients in view of the specific circumstances of the Citigroup tender offer, "which Orbis believes inadequately serve the interests of its clients."
    
Prospects For Citi's Deal

Citigroup, the largest U.S. bank, already holds roughly 5% of Nikko and is offering to buy all shares tendered as it aims for a minimum of 50%.

Management at Nikko has agreed to the Citigroup deal, which would be the biggest-ever foreign buyout of a Japanese company.

One major Nikko shareholder, Mizuho Financial Group, will tender all of its shares in Nikko to Citigroup, a source close to the matter said on March 16, boosting the chances the takeover bid will succeed.

Mizuho Corporate Bank, Mizuho Financial Group's corporate lending arm, holds a 4.8% stake in Nikko, which agreed to be taken over by Citigroup after its accounting scandal led to a downturn in business and an executive shake-up.

Two other big shareholders of Nikko have said recently, however, that the brokerage is worth a lot more than Citigroup's offer.

Southeastern Asset Management, which controls about 6.6%, said on March 23 it increased its appraisal of Nikko's value above its initial assessment of 2,000 yen per share. And Harris Associates, which controls about 6 percent, has also told news media that Nikko shares are worth more than 2,000 yen each.