TOKYO (Reuters) - Sumitomo Trust and Banking 8403.T is in final talks to buy Citigroup’s (C.N) asset management arm in Japan for more than 100 billion yen ($1 billion), the Nikkei business daily reported on Friday.
Sumitomo Trust, a major Japanese trust bank which manages about 26 trillion yen in assets, has outbid U.S-based Bank of New York Mellon Corp (BK.N) and Japanese insurer T&D Holdings Inc (8795.T), the Nikkei said.
Spokesmen for Sumitomo Trust and Nikko Citi Holdings, Citigroup’s holding firm in Japan, declined to comment.
Nikko Asset Management is Japan’s third-largest fund manager with about $90 billion in assets under management.
Citigroup put it up for sale as part of efforts to recover from heavy losses in the global financial crisis.
The sale would be the second stage of Citigroup’s retreat from many of its Japanese assets. It has already sold Nikko Cordial and key investment banking assets to Sumitomo Mitsui Financial Group (8316.T), the country’s third-largest bank, for about $5.9 billion.
Sumitomo Trust’s acquisition of Nikko Asset could strengthen its core trust bank business by expanding the asset management operations as Japan’s No. 3 asset company has expertise in developing new financial products for institutional and retail investors, analysts said.
Nikko Asset is strong in alternative asset products and derivatives and is a leader in Japan in developing exchange traded funds (ETFs), industry sources said.
Katsuhito Sasajima, a senior analyst at JP Morgan Securities Japan Co Ltd, said Sumitomo Trust’s possible purchase of Nikko Asset would be a valid strategy to expand the business.
“The move is expected to strengthen Sumitomo Trust’s core business. I think Sumitomo Trust cannot differentiate themselves by buying a commercial bank, but it could differentiate more by buying an asset management company,” Sasajima said.
Sumitomo Trust already has advantage in managing funds for pensions, and the tie-up could expand their client base more widely, Sasajima said.
Sumitomo owns a fund management arm, STB Asset Management, which manages 1.26 trillion yen in assets.
Nikko Asset’s wider distribution network could be another positive incentive for the trust bank, they said.
Nikko Asset sells funds through a network of banks, Japan Post Bank, credit associations and securities, instead of just relying on group company, Nikko Cordial, for distribution.
Nikko sells about 50 percent of its products through Nikko Cordial, while industry leader Nomura Asset Management and No. 2 Daiwa Asset Management market about 80-90 percent of their products through brokerage affiliates, industry sources say.
Sumitomo Trust could also keep the distribution channel held by Nikko Cordial considering that the trust bank already has a strong tie with Sumitomo Mitsui Financial Group -- the next owner of Nikko Cordial, analysts said.
Nikkei said Sumitomo Trust and Citigroup will aim to seal the deal by next week.
Citigroup also has plans to sell Japanese telemarketer Bellsystem24 Inc in a deal that could be worth around $1.5 billion, people familiar with the matter have told Reuters.
Reporting by Yumiko Nishitani, David Dolan and Chikafumi Hodo; Editing by David Cowell