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July 31, 2009 3:16 PM

Davis Polk, Paul Weiss on $1.26 Billion Sale by Citi of Nikko Asset Management

Posted by Francesca Heintz

Citigroup announced Thursday that it plans to sell off another piece of its Japanese operations. In a deal that will net Citi $795 million, the bank is selling its majority stake in Nikko Asset Management to Sumitomo Mitsui Banking Corporation. The deal comes two and a half months after Citi sold most of its stake in Japanese broker-dealer Nikko Cordial Corporation to Sumitomo.

Paul, Weiss, Rifkind, Wharton & Garrison partners Toby Myerson and Steven Williams led the negotiations for Citi on the deal. Myerson returned to his New York office Friday morning after spending most of the past week in Tokyo working on the sale.

Citi initially had planned an IPO for Nikko Asset, according to Myerson, but as the credit markets soured, the bank considered alternative plans. "It's been a very long process," says Myerson. "We started to plan an IPO in the fall that went very far down the road. Then a funny thing happened on the way to the IPO, the financial markets melted down in the fourth quarter of last year and that process was suspended."

This week's deal, as well as the sale of Nikko Cordial in May, have been part of Citi's plan to sell of its noncore businesses in Japan. Earlier this month, the bank also sold its Japanese trust bank, NikkoCiti Trust and Banking Corp., to Nomura Trust and Banking Co. for $200 million.

Even with these divestitures, Myerson says, Citi maintains a strong presence in Japan--it has been in that market for over 100 years. Citi still operates the largest foreign-owned retail banking operation in Japan, according to The New York Times, as well as investment and corporate banking services.

The Paul Weiss team included: Tokyo-based partner Tong Yu, London-based partner David Lakhdhir, and New York tax partner Jeffrey Samuels. Hiroshi Mitoma of Nagashima Ohno Tsunematsu served as Japanese counsel for Citi.

Sumitomo Trust was advised by Satoshi Nakamura of the Tokyo firm Mori, Hamada & Matsumoto.

Davis Polk & Wardwell's Theodore Paradise represented Nikko Asset Management in the deal.

The deal is expected to close in the fourth quarter.

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