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Off-Balance Sheet: Good Gracious -- Citigroup Wants Nikko Cordial


Nikko Cordial is, without a doubt, the most polite, well-mannered, and courteous brokerage house in Japan.


Relax, it's only money. Here in the 'Ville we like to keep things smart, but we also love to laugh. All work and no know how it goes. With that in mind we give you The "Off-Balance Sheet," a place where Minyans can experience humorous takes on the world of finance, personal stories from our Professors and Minyans and all the other stuff that makes life worth living. So take a break from the flickering ticks and dive in.

As reported in The Wall Street Journal today, Citigroup (C) is expected to announce a tender offer for more than 50 percent of Nikko Cordial Corporation, a $5 billion deal that, according to the article, "would be the biggest acquisition of a Japanese brokerage firm by a foreign company."

Nikko Cordial has had its share of problems recently; in December, an accounting scandal forced the company to restate earnings for the past two years. Now, the Tokyo Stock Exchange is considering a delisting of the company's shares.

So, why Citigroup's keen interest in Nikko Cordial?

Simply put, to many industry insiders, Nikko Cordial is, without a doubt, the most polite, well-mannered, and courteous brokerage house in Japan.

"Nikko Cordial is far and away more cordial than any other firm I've ever been involved with," said a source familiar with the deal. "Not that the other big players aren't cordial, but Nikko takes it to a whole other realm."

This sentiment was echoed by an Asian market strategist with whom I spoke.

"Nikko Cordial is unbelievable," he told me. "The bowing, the 'pleases and thank yous' all over the place-they're offering you tea before you even get a chance to take your coat off. If there ever was a company that picked exactly the right name, it's Nikko Cordial."

Take a look at the third management principle on Nikko Cordial's four core management principles, pictured below:

Nikko Cordial Group's Four Core Management Principles

I challenge anyone to find a management principle more cordial than that.

I called Nikko Cordial's headquarters in Tokyo and spoke to an exceptionally considerate receptionist, who, after making a valiant attempt to answer my questions about the Citigroup deal despite having an extremely tenuous grasp of English, transferred me to a Nikko spokesperson, whom I found to be exceedingly genial. Although I couldn't extract much information from him, our conversation was incredibly pleasant, the Nikko mouthpiece being one of the most affable people I have ever had the pleasure of dealing with.

Even corporate communications from Nikko Cordial are, in a word, cordial. A letter to investors pertaining to the aforementioned accounting scandal posted on Nikko Cordial's website opens with this:

To shareholders and investors;

We at Nikko Cordial Corporation extend our deepest apologies for the tremendous inconvenience and anxiety caused due to the series of events in relation to the company's restatement of financial reports.

The body of the missive is written just as cordially, as one would expect. It ends thusly:

We thank you in advance for your kind understanding and sincerely hope to be provided with your continuous support and guidance.

Wow. If that's not cordial, then I don't know what is.

As you might well expect, it's not just the Nikko Cordial employees that field media inquiries who are amiable. Take a look at Masa Narita, Senior Vice President, Strategic Planning Division and Chief Representative for the New York Office of Nikko Cordial.

Masa Narita

I have never had the pleasure of meeting Mr. Narita, but, just from the look on his face, I can pretty much guarantee that few, if any, other speakers will be as gracious or friendly as Masa Narita when he delivers a talk at an industry seminar in San Francisco this April.

Meanwhile, I asked Minyanville's own Kevin Depew for his thoughts on Nikko Cordial.

Nikko cordial? No thanks, it's not even noon yet. And the Rusty Nail is my cordial of choice, anyway.

No, Nikko Cordial is a Japanese brokerage. Not a drink.

Look, Marty McGoldschlager, I've actually got some work to do here, so go peddle your liquor cabinet somewhere else.

Peddle my liquor cabinet? What are you talking about?

Boy, you're a real arm twister aren't you? Okay, you got me. I'll try one of your Nikko cordials. And gimme a Campari and soda, too.

I think we have a slight misunderstanding here-

No worries, not everyone carries Campari-too bitter. Just make it a Nikko cordial, one Kahlua and cream, a Riga Black Balsam, two Grand Marniers, a Drambuie on the rocks, and four-no, five shots of Mezcal. And it better be Chichicapa, not that cheap swill I always see you slamming down your gullet.

Okay, first-Nikko Cordial is a brokerage house, not a cordial in the sense that you're referring to it; and secondly, Mezcal is not a cordial anyway. It's a spirit from the agave plant.

Um, rule number one is the customer is always right, and second, if you want to work in this bar, when the customer is wrong, refer to rule number one. Got that, Baczewski?

But we're not in a bar -
You're going to quit because of one drink order? Nice work ethic.

This isn't a bar, Kevin. This is Minyanville.

Then why are we ordering drinks?

We're not. That's my point. I wanted to ask you what you thought about Nikko Cordial and Citigroup's plan to acquire more than 50 percent of the company.

Here's what I think: Citigroup is buying Nikko Cordial for $10.8 boring blah blahs and the deal should put boring boredom into the top boringness of bored borings for blah blah blah blah blah. That pretty much sums it up. Now, let's go get those cordials!

But it's not even noon yet.

It is if we set our watches ahead three hours.

If I buy you some cordials will you answer the questions I have?

If your questions involve what kind of cordial we want next, then yes. Also, every time someone mentions the words "Citigroup" or "Nikko", he has to do a shot of Ouzo.

I headed to the local Blarney Stone with Kevin with no idea how I had gotten myself onto another one of Depew's verbal treadmills, and a strong suspicion that the rest of our conversation would result in a severe hangover.

At about 2 pm, Kevin slurred something about how Nikko Cordial's ADRs have always traded thinly in the U.S. and that using a limit order would be one way to go to avoid getting whipsawed. Then he passed out in his Shepherd's Pie.

I'm just glad I didn't bring up Masa Narita. That would've really sent him over the edge.

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