"Citigroup and Nikko Cordial are forming the alliance in order to create one of Japan's leading financial services groups and to enable the combined franchise to pursue important new growth opportunities, giving due respect to Japanese culture and business practices," Citigroup executives say in a statement. "The alliance capitalizes on their highly complementary businesses and capabilities, leverages their longstanding cooperative relationship and builds upon the success of their existing joint ventures."

Nikko has four core business areas: retail, asset management, investment banking, and merchant banking. The company, which is considered one of the largest brokerage firms in the country, has $250 billion of assets under management and the retail business has 109 nationwide locations.

Citigroup has agreed to pay $11.63 per Nikko share. Should Citigroup purchase the remaining 95.1% of Nikko it does not own, Citigroup would pay a total of $10.8 billion. If shareholders do not agree to let Citigroup purchase at least an additional 45% of the company, the deal will be void. Other large Nikko shareholders include Travelers Group International LLC with a 4.9% share, Mizuho Corporate Bank with a 4.8% share and Japan Trustee Services Bank with a 4.3% share.

If shareholders approve the deal, this will become Citigroup's largest Asian acquisition and the largest foreign purchase of a Japanese firm.

Nikko stock rose significantly on the Tokyo Stock Exchange from 1,179 yen to 1,340 yen, almost meeting the year high of 1,379 yen. Within an hour of trading this morning Citigroup stock had risen $0.62 to $49.87 per share.