Citigroup (C)

Transaction overview

Under the agreement announced today, Citigroup Japan Holdings will enter into a share exchange agreement with Nikko Cordial once the parties have finalized the operational aspects of the delivery of Citigroup shares to Nikko Cordial shareholders. The share exchange agreement is expected to be signed by the end of October 2007. The share exchange is subject to approval by Nikko Cordial shareholders at an extraordinary general meeting, which is expected to be held in December 2007. Citigroup Japan Holdings has agreed to vote its shares in favor of the share exchange, which is expected to be completed in January 2008.

The agreement announced today provides that the exchange ratio for the share exchange will be determined in December 2007 or January 2008 (as specified in the share exchange agreement) and be based on a value of ¥1,700 per Nikko Cordial share. The actual number of Citigroup shares to be exchanged for Nikko Cordial shares will be determined using the average trading price of Citigroup shares (subject to a minimum average of $37.00 and a maximum average of $58.00 per Citigroup share for exchange ratio calculation purposes) over an agreed number of trading days during the agreed valuation period. This methodology for determining the exchange ratio is intended to limit the exposure of Nikko Cordial shareholders to Citigroup share price volatility and exchange rate risk during the period from today’s announcement to the determination of the exchange ratio, while also protecting Citigroup against any unforeseen decline in the trading price of Citigroup shares during that period. As a consequence of using this exchange ratio methodology, the value of the Citigroup shares actually received by Nikko Cordial shareholders upon completion of the share exchange may be higher or lower than ¥1,700 per Nikko Cordial share, depending upon fluctuations in Citigroup's share price and in the dollar-yen exchange rate.

The share exchange is intended to be non-taxable for Japanese tax purposes for Nikko Cordial as well as for Japanese shareholders of Nikko Cordial generally.

Prior to completion of the share exchange, Citi intends to purchase additional Nikko Cordial shares – not to exceed approximately 1% of Nikko Cordial’s issued shares – in on-market transactions, subject to all applicable laws and regulations. These purchases, if effected, should promote liquidity in the trading market for Nikko Cordial shares prior to completion of the share exchange.

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For Citi, the share exchange transaction is expected to be neutral to earnings per share in 2008 and accretive thereafter. The transaction will also enable Citi to accelerate its strategy and growth in the world’s second largest economy through an established partner with a premier franchise and brand and with a very well established network in Japan.

The share exchange is expected to have a transaction value of approximately ¥530 billion (or US$4.6 billion) at the time the exchange ratio is determined.

Citi is acting as sole investment banking adviser to Citigroup Inc. and Citigroup Japan Holdings Ltd. on this transaction.