TOKYO (Bloomberg) — Citigroup Inc. increased its takeover offer for Nikko Cordial Corp. by 26 percent to $13.4 billion after the Japanese brokerage's biggest investors rejected the earlier bid.The biggest US bank boosted its cash bid to 1,700 yen a share from 1,350 yen on March 6, Citigroup said in a statement yesterday. The proposal came a day after the Tokyo Stock Exchange declined to remove Nikko over an accounting fraud, meaning investors in Japan couldn't be forced to sell.

Three of Nikko's largest shareholders — Harris Associates LP, Bermuda-based Orbis Investment Management Ltd. and Southeastern Asset Management Inc. — have said Nikko is worth at least 2,000 yen. Buying Nikko would give New York-based Citigroup control of more than 100 branches in Japan and an additional 30 trillion yen ($257 billion) of clients' assets in Asia's biggest economy.

"Citigroup had to raise the price as the threat to Nikko's listing status changed," said Naoki Fujiwara, who oversees the equivalent of $720 million at Shinkin Asset Management Co. in Tokyo. Citigroup may have to increase the offer again to win shareholder approval, he said.

Shares of Nikko rose 6.1 percent today to 1,490 yen in Tokyo before Citigroup announced the new bid. The stock then rose above 1,670 yen in German trading.

The revised offer values Nikko at 2.04 times book value, up from 1.62 times for the first bid. Nomura Holdings Inc., Japan's biggest brokerage, has a price-to-book ratio of 2.26 and Citigroup trades at 2.08 times book value.

Harris Associates of Chicago, Orbis and Southeastern Asset Management of Memphis, Tennessee, along with Toronto-based Mackenzie Financial Corp., rejected Citigroup's initial offer. Together, the four firms control about 25 percent of Nikko.

Revelations that former Nikko executives inflated profit in 2004 left the company in disarray and gave Citigroup an opportunity to jumpstart its Japan expansion by buying Nikko. The two companies already have an investment-banking joint venture in Tokyo for share sales and providing mergers advice. Regulators in 2004 shut Citigroup's private bank in Japan because it failed to comply with money-laundering rules.

Japan's Securities and Exchange Surveillance Commission on December 18 said Nikko overstated profit in documents related to a corporate bond sale in November 2005. Since then, six top executives have left the company and Nikko has sued three of them.

The exchange said on Monday that Nikko's offences didn't meet the criteria for delisting a stock. It has asked the company to file a "business compliance report" by March 26.

Citigroup revised the offer price as the outlook for Nikko's future improved, the two companies said in a joint statement yesterday to the Tokyo exchange.