Citigroup now wants to dump Nikko (at least for now)

Posted Jan 18th 2009 11:40AM by Tom Taulli
Filed under: Citigroup Inc. (C), Bank of America (BAC)

Citigroup (NYSE: C) is the result of grand ambitions of a Wall Street dealmaker, Sandy Weill. But, of course, this week things came to an end as the company announced a dramatic dismantling of the global financial empire.

The bank's CEO, Vikram Pandit, has little choice. After all, Citigroup's stock continues to plunge, with the market cap at a lowly $19 billion.

But the new strategy has a big problem: In light of the continued dangers in the banking system -- such as Bank of America's (NYSE: BAC) horrible experience with its purchase of Merrill Lynch -- it's going to be tough to find willing buyers of Citigroup's far-flung assets. The asset sales are likely to be prolonged and priced at distressed levels.

Interestingly enough, despite the urgency for change, Citigroup has indicated that certain assets are off-limits, such as the Nikko Cordial Securities unit (the #3 brokerage operation in Japan) and Grupo Financiero Banamex SA (the banking platform in Mexico). This was the situation just three days ago.

No doubt, these assets are key for the growth of Citigroup. Right?

Perhaps. But things can change quickly in the current economic turmoil. Now, according to a report in the Wall Street Journal [a paid publication], it looks like Citigroup now wants to unload Nikko. Bear in mind that Citigroup paid a whopping $17.95 billion for the company.

Basically, Citigroup needs to find quick ways to bolster its capital base. And, this means ridding itself of key assets, which unfortunately is likely to stunt long-term growth as the company will need to forgo the benefits of its choice properties.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

Tags: BAC, Bank of America, Citigroup, inthenews, Nikko, Nikko Cordial Securities, Sandy Weill, Vikram Pandit

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Reader Comments (Page 1 of 1)

1-18-2009 @ 3:44PM

Bobby said...

Another "iffy" bullshit article on the circumstances at Citi.

There is no way a comparison between Citi's sale of Nikkon & BAC's aquisition of Merrill.

The Merrill deal was put together basically overnight & proven to be a drag on BAC. This Nikkon deal is one TO BE CONSIDERED as a possible sale & doesn't even list the sales price of the unit in comparison to what Citi paid for it (18.9B). Couldn't they actually break even on it or lo & behold even make a profit? I guess that would be too damaging to report!

Why would you want to just throw loose numbers around in a piss poor comparison that has basically no correlation whatsoever?

Wouldn't it be far more positive to report on the incoming administrations's idea of putting together a "central bad bank" that will help clear these troubled banks balance sheets?

I guess that would be reporting responsibly on positive news & helping the pysche of bloodied investors.

You people don't get it,, the gov't doesn't want C or BAC to fail! Their sheer size & command of assets even at distressed prices will get them through this mess.

You can beat it down with stampede negative psychology but smart investors will see the light at the end of the tunnel..... The fact is none of you know the bottom line results or figures involved to make an intelligent call.......