As part of its restructuring efforts, Citigroup Inc. (C) has agreed to sell its private equity unit to Lexington Partners, according to a report by the interactive forum peHUB. Citi is said to receive around $900 million from this sale.
The portfolio that Citi has agreed to sell consists of Citi’s holdings in bank-branded funds-of-funds, mezzanine and co-investment vehicles. The management services for the unit will be provided by StepStone Group.
This unit is also part of Citi Holdings, which consists of Citi’s non core assets. The company aims to de-leverage Citi Holdings through a number of steps that include joint ventures, divestitures, and asset runoffs. As a matter of fact, the company has already announced the sale of a number of its businesses within Citi Holdings.
In April this year, Citi agreed to sell a hedge fund business to SkyBridge Capital, an alternative-investment firm. Though the terms of the deal were not disclosed, the hedge fund business had $4.2 billion of assets under management. Additionally, Citi decided to sell its real estate investment unit Citi Property Investors, which had a net asset value of $3.5 billion, to Apollo Management LP.
One of the companies severely hurt during the credit crisis, Citi, received $45 billion as bailout fund in 2008 under the Troubled Asset Relief Program (TARP). Later, in 2009, around $25 billion of that was converted into common stock. In December 2009, Citi repaid $20 billion of trust preferred securities held by the U.S. Treasury under the TARP. At that time, the Treasury had approximately 27% of Citi’s common stock, which it is selling off now.
However, in an effort to wind down its stake in Citi, the U.S. Treasury recently announced the sale of 1.1 billion shares of Citi. The sale also marks the completion of its second trading plan to shed Citi shares, where Morgan Stanley (MS) was the sales agent. Following the sale, the Treasury currently holds around 5.1 billion shares or a 17.5% stake in Citi.
Citi’s restructuring efforts are appreciable. However, the uncertainty regarding the economic recovery and the high level of unemployment are expected to be a drag on its earnings in the upcoming quarters.
Citi is currently rated as Zacks #3 Rank (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months. The stock has a long-term Neutral recommendation.
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