Citigroup bids $10.8bn for Nikko

Nikko Cordial is Japan's third largest brokerage

US banking giant Citigroup has offered to buy Japan's third-largest brokerage, Nikko Cordial, for 1.253 trillion yen ($10.8bn; £5.6bn).

If it goes ahead, the deal would be the biggest takeover of a Japanese firm by a non-Japanese company.

Nikko has been tainted with scandal and faces possible delisting from the Tokyo Stock Exchange.

The threat follows Nikko admitting it had exaggerated its profits for the year to March 2005.

An investigation at the firm found that former executives had been "actively involved" in inflating the company's profits.

Approval given

Citigroup said it wanted to take a majority stake in the firm, and hoped to achieve a complete buyout.

The US bank, which currently owns a 4.9% stake in Nikko, is offering 1,350 yen ($11.60; £6.02) per share - a 10% premium on its current share price.

Reports that the offer was imminent sent Nikko shares up 13.7% in trading on Tuesday ahead of Citigroup's announcement.

Nikko, which has 109 retail branches, said its board had approved Citigroup's offer.

The deal would eclipse Vodafone's 2001 $7.6bn purchase of Japan Telecom and the J-Phone mobile business - Japan's biggest foreign takeover to date.