UPDATE 1-Mizuho to sell all its Nikko shares to Citi-source

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TOKYO, March 16 (Reuters) - Mizuho Financial Group (8411.T) will tender all of its shares in Nikko Cordial Corp. 8603.T to Citigroup's (C.N), a source close to the matter said on Friday, making it more likely Citigroup's $14 billion bid will succeed.

Mizuho Corporate Bank, Mizuho Financial Group's corporate lending arm, owns a 4.8 percent stake in Nikko.

The source said Mizuho Corporate Bank bought Nikko shares at about 1,000 yen apiece and its holdings have an unrealised profit of about 30 billion yen ($255.6 million).

The tender offer, which kicked off on Thursday, will end on April 26, and Mizuho has not sold its holdings yet, the source added.

Shares of Nikko ended the morning session unchanged at 1,685 yen, remaining below Citigroup's offer price of 1,700 yen, while those of Mizuho Financial Group were down 3.4 percent at 745,000 yen.

Besides Mizuho, Dai-Ichi Mutual Life Insurance Company, which owns 1.4 percent of Nikko, will also respond to Citigroup's offer, the Nikkei financial daily said on Friday.

Sales by the Japanese stakeholders may increase Citigroup's chance of succeeding in its bid after the U.S. bank was under pressure to sweeten its offering price. Citigroup raised its bid price to 1,700 yen from 1,350 yen earlier in the week as Nikko escaped delisting by the Tokyo Stock Exchange over an accounting scandal, a development that weakened the bank's leverage against North American investors who had dismissed its offer as too low. Four U.S. and Canadian investment funds that own about 25 percent of Nikko had complained that Citigroup's first offer undervalued the firm by a third or more.

The funds have not commented on Citigroup's new offer, which still falls short of the 2,000 yen a share that most of them have demanded.

((Reporting by Eriko Amaha, editing by Hugh Lawson;

Reuters messaging: eriko.amaha.reuters.com@reuters.net;

+81-3-3432-8969))

($1=117.35 Yen) Keywords: MIZUHO NIKKO/

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