Citigroup Inc. (C) may sell around $570 million of investments in CVC Capital Partners Ltd., a London-based buy-out firm, according to a Bloomberg report. This follows Citi’s efforts to restructure its business and shrink Citi Holdings, which constitutes its non core assets.
According to the report, Citi is selling $250 million of interests in two Asia funds that are managed by CVC and €15 million ($21 million) in a European fund. Moreover, Citi is also selling around €210 million (nearly $300 million) of stake in a number of European companies where it co-invested along with CVC.
Citi has recently concluded the divestment of its private equity fund of funds, mezzanine and co-investment businesses to StepStone Group LLC and Lexington Partners. Lexington acquired Citi’s interest in fund of funds and co-investment businesses while StepStone Group would provide the management and advisory services for the unit’s $4 billion fund of funds, feeder and co-investment funds. These transactions were estimated to reduce Citi Holdings by $1.1 billion. The company is now continuing to look for strategic ways to shed the $2 billion in buyout holdings that is left in its kitty.
Citi segregated its assets as core and non-core last year; Citi Corp. represents the company’s core assets while Citi Holdings represents its non-core assets. Citi aims to de-leverage Citi Holdings through a number of steps that include joint ventures, divestitures, and asset run-offs, investing the money thus generated in the company’s core business.
As a matter of fact, Citi has already announced the sale of a number of its businesses within Citi Holdings. Recently, Citi also decided to exit its private student loan business by divesting its unit Student Loan Corp. to Discover Financial Services (DFS) and SLM Corporation (SLM) − aka Sallie Mae − through a string of transactions.
With the completion of the sale of its student loan business currently anticipated in the fourth quarter, the company aims at reducing its total assets and holdings below 20% of its balance sheet by the end of this year versus almost 40% at the beginning of 2008.
Citi shares are maintaining a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation. We have a long-term “Neutral” recommendation on the stock.
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