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Travelers buys Nikko stake
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June 1, 1998: 6:58 a.m. ET
U.S. giant takes $1.58 billion stake in Japan's No. 3 brokerage
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NEW YORK (CNNfn) - U.S. financial services giant Travelers Group Inc. announced Monday a $1.58 billion investment in Nikko Securities Co. Ltd., Japan's third-largest brokerage.
Travelers, fresh off a $70 billion deal for CitiCorp in April, will take a 25 percent equity stake in the Japanese firm through its Salomon Smith Barney investment banking unit.
The two companies will also form a new investment banking firm in Japan, 51 percent owned by Nikko and 49 percent owned by Travelers to be set up in January next year.
The purchase is the third multibillion-dollar equity deal spearheaded by Sanford I. Weill, Travelers chairman, and marks one of the largest investments ever by a U.S. company in a Japanese financial services firm.
In the deal, Travelers becomes the largest stakeholder in Nikko and will hold a seat on its board. Nikko will gain a stake in Travelers, but its size was not disclosed.
A continued slump in the Japanese economy, a dollar-yen ratio at its highest levels in seven years and recent financial-sector deregulation in Japan provide a backdrop for the deal.
Travelers is not the first big U.S. financial firm to seek opportunities in Japan after a series of market woes struck Asia late last year. Merrill Lynch earlier this year began buying branches of recently-defunct Yamachi Securities Inc., Japan's No. 4 brokerage.
Shares of Travelers (TRV), which are included in the Dow Jones Industrial Average, closed Friday down 3/8 at 61-1/4.
In Tokyo Monday, Nikko shares (8603.T) rose 46 yen, or 10.55 percent, to 482 yen.
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