Citigroup Inc. (C) is planning to shed off 12 million shares of Primerica Inc. (PRI), an insurance company that Citi had spun off in the first half of 2010. The 12 million shares will go for public offering and could fetch Citi proceeds over $280 million based on Primerica’s closing price of $23.41 on Wednesday.
Citi intends to grant the underwriters in the offering a 30-day option to purchase up to an additional 1.8 million shares of Primerica’s common stock to cover over-allotments, if any. Citigroup Global Markets Inc. will act as sole book-running manager for the offering.
Primerica, headquartered in Duluth, Georgia, is a leading distributor of financial products to middle income households in North America with approximately 92,000 licensed representatives. The company and its representatives offer clients term life insurance, mutual funds, variable annuities and other financial products.
Immediately following completion of this offering, Citi will own between approximately 20.6% and 23.1% of Primerica’s outstanding common stock, depending on whether or the extent to which underwriters exercise their over-allotment option. We believe that this planned sale out of Primeric’s common stock is a strategic fit for Citi.
Citigroup has been severely hurt by billions in losses and write-downs of problem loans and toxic assets. The company had to ultimately resort to a bailout. It received $45 billion bailout during that period and went for a restructuring plan across its business.
It has termed CitiCorp as its core operating unit and Citi Holdings as its non-core unit and intends to dispose of (through sale and divestitures) the non-core operations. Primerica happened to be a part of this non-core unit.
Citi currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Considering the stock fundamentals we also have a “Neutral” recommendation.
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