– Citi (NYSE: C) today announced that it has reached a definitive agreement to sell its Japanese domestic securities business, conducted principally through Nikko Cordial Securities Inc., to Sumitomo Mitsui Banking Corporation (hereafter SMBC) in a transaction with a total cash value to Citi of ¥774.5 billion (US$7.9 billion at an exchange rate of ¥97.75 to US$1.00). The cash value is comprised of the purchase price for the transferred business of ¥545 billion, the estimated purchase price for certain Japanese-listed equity securities held by Citi of ¥28.5 billion, and ¥201 billion of cash derived either through the retention of excess cash in Nikko Cordial Securities or repayment of its outstanding indebtedness to Citi.
The transaction is expected to generate approximately US$2.5 billion of tangible common equity for Citi at closing, with Citi expected to recognize an after-tax loss of approximately US$0.2 billion. On a pro forma basis for the transaction, Citi's March 31, 2009 Tier 1 capital ratio would have increased by approximately 27 basis points. The transaction is expected to close by the end of the fourth quarter of 2009, subject to regulatory approvals and customary closing conditions.