Citigroup Inc. (C) said Sunday that it has agreed to sell its controlling stake in Japanese call center operator Bellsystem24 Inc. to private equity firm Bain Capital Partners LLC for 93.5 billion yen, or $1 billion. Under the terms of the deal, Citigroup's private investment unit Citigroup Capital Partners Japan Ltd. will receive cash consideration for the sale of its 93.5% stake in BellSystem24. A firm owned by investment funds advised by Bain Capital will launch a tender offer for the shares in Japan.
The tender offer, subject to regulatory review and customary conditions, is expected to be launched on or before November 20, 2009 and be settled on December 30, 2009. The transaction, upon completion, would be the largest buyout by a private equity firm in Japan in nearly two years.
New York-based Citigroup noted that after completion of this transaction, its assets will have been reduced by $1.2 billion, in line with the company's goal to reduce the assets in Citi Holdings while optimizing their value. The company said it does not expect the deal to have a material impact on its net income or capital ratios.
Citigroup, the nation's third largest bank, was on the verge of collapse when it received $45 billion in bailout funds in three tranches from the Treasury's TARP Capital Purchase Program, which was set up last year to prop up the U.S. financial system. The bank has been trying to sell businesses outside its core operations to raise cash.
In October, Citigroup said it completed the sale of its Japanese brokerage Nikko Cordial Securities to Sumitomo Mitsui Banking Corp. in a cash and debt deal of 776 billion yen, or $8.7 billion.
Citigroup Capital Partners Japan, formerly known as Nikko Principal Investments Japan Ltd., acquired Bellsystem24 in 2004 from CSK Holdings Corp. In August, Citigroup placed the call center operator for sale as part of a major restructuring of its group in Japan.
Separately, Bain Capital said it has received committed financing for the transaction from Japanese banks - Sumitomo Mitsui Banking Corp., the Bank of Tokyo-Mitsubishi UFJ, Ltd. and Mizuho Corporate Bank.
Commenting on the deal, Yuji Sugimoto, a Managing Director at Bain Capital, said, "BELLSYSYTEM24 is the industry leader in the Japanese call center market. We believe there is a significant opportunity to grow the business as companies continue to look for ways to not only lower costs, but also benefit from greater efficiency and flexibility by outsourcing their call center operations."
Bain Capital has reportedly outraced rivals such as Europe's Permira, U.K.'s CVC Capital Partners Ltd. and U.S-based Blackstone Group Ltd. (BX) to secure the deal.
Bain Capital established offices in Tokyo in 2006, and has a team of 20 investment and operations professionals in Japan to pursue investment opportunities and work with its portfolio companies.
The private equity firm has made investments in several companies with principal or significant operations in Japan, including MEI Conlux, Sun Telephone, D&M Holdings, Toys "R" Us, and Burger King. The firm noted that it also has prior experience investing in the call center industry, having invested successfully in U.S.-based call center company Stream International.
Bain Capital was advised on the transaction by Ropes & Gray, Nagashima Ohno & Tsunematsu, PricewaterhouseCoopers, UBS, Nikko Cordial Securities, Mizuho Securities, and Morgan Stanley. Citigroup Capital Partners Japan was advised by Citigroup Global Markets Japan and Goldman Sachs Japan.
C closed Friday's regular trading session on the NYSE at $4.05, down $0.01 or 0.25% on a volume of 196.19 million shares.
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