Travelers, which only last month announced plans to merge with Citicorp to create a $70bn powerhouse, said it would buy Nikko shares worth 70bn yen and Nikko convertible bonds worth 150bn. Nikko will buy between 5bn and 10bn-worth of shares in Travelers.
"Our creating a partnership with Nikko will allow us to be more productive not only in this marketplace but all around the world," said Sanford Weill, chairman and chief executive officer of Travelers Group, at a press conference in Tokyo.
Salomon Smith Barney, a subsidiary of Travelers, and Nikko are to set up a joint venture - Nikko Salomon Smith Barney - which will focus on Japanese institutional clients. The venture will be based in Japan, although their international networks will be affected.
Michel de Carvalho, head of international operations at Nikko Securities, confirmed there would be "fall-out" from the deal at Nikko Europe's operations in the City. Nikko Europe, a wholly owned subsidiary of Nikko Securities, employs around 500 people in London.
However, Mr de Carvalho stressed there would be no immediate job losses, and any redundancies would be handled sensitively. He said he did not anticipate job cuts "for the next seven to nine months".
Worst hit will be employees at Nikko Europe employed in European equities and bonds. Those involved in doing deals involving Japanese debt and equity issues would transfer to a London-based branch of Nikko Salomon Smith Barney.
Masashi Kaneko, president of Nikko Securities, said he did not expect the tie-up would trigger immediate job cuts in Japan. Investors in Tokyo reacted positively to the news, pushing up Nikko Securities shares 11 per cent to close at 482.
Separately, the Tokyo Stock Exchange launched an investigation yesterday over possible insider trading involving Nikko shares after the price of its stock jumped Friday, an exchange official said. Nikko shares closed at 436 yen on Friday, up 4.8 per cent from Thursday's close.Reuse content