Nomura launches service to help clients unwind cross shareholdings

FILE PHOTO: A logo of Nomura Holdings is pictured in Tokyo, Japan, December 1, 2015.   REUTERS/Toru Hanai
FILE PHOTO: A logo of Nomura Holdings is pictured in Tokyo, Japan, December 1, 2015. REUTERS/Toru Hanai

By Makiko Yamazaki and Yuki Nitta

TOKYO (Reuters) - Nomura Holdings Inc's trust banking unit has launched a service that helps client firms unwind cross-shareholding, a longstanding practice in Japan that critics say could insulate management and undermine corporate governance.

Cross shareholding, where companies take stakes in partners to cement relationships, has been discouraged by Japan's corporate governance code. However, nearly a third of the country's $7 trillion stock market is still owned by such corporate shareholders.

The new service allows the issuing company to set up a trust fund at Nomura's trust banking unit, which buys stocks from cross shareholders in off-floor trading and gradually sells them on the market in a certain period of time.

The scheme helps ease the price impact from a large-volume share sale and also allows large cross shareholders to offload their holdings without a discount to the market price typical of block trades.

"We expect to have about 30 deals over the next three years," Ryo Miyajima, managing director at Nomura's equity product solutions department, told Reuters in an interview on Thursday.

It has drawn interest from companies scrambling to increase tradable shares, Miyajima said, as the Tokyo bourse is introducing stricter liquidity rules for its prestigious main board, making it tough for those largely owned by parent companies or business partners.

Digital marketing company Cross Marketing Group Inc was the first to set up such a trust fund this week, buying an 8% stake from its second-largest shareholder.

(Reporting by Makiko Yamazaki; Editing by Kim Coghill)

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