Financial services firm Citigroup Inc. (C,C) plans to sell or split off its $10 billion Citi Private Equity unit, expanding the list of money-management businesses the U.S. bank is disposing of to reduce debt, people familiar with the matter said, reports Bloomberg.
Citigroup, 27% owned by the government following a bailout in 2008, plans to sell almost a third of its $1.86 trillion of assets under regulatory pressure to shrink.
Citi Private Equity, which was formed in 2000, acquires minority stakes in companies and invests in other buyout funds. It reportedly oversees about $2 billion of Citigroup's money.
Managers of the unit, led by Todd Benson and Darren Friedman, are in talks to acquire it for themselves alongside new partners or with other financing, one person reportedly said.
Early in the decade, Citi Private Equity was used partly to consolidate investments inherited from the 1998 merger of Citicorp and Travelers Group Inc., people familiar with the matter said. Early 2007, Citi Private Equity raised about $3.3 billion of new funding.
The decision to sell the unit was made last year, before President Barack Obama on January 21 proposed banks be forced to divest their private-equity firms and hedge funds, the people familiar with the matter said. Ownership of such businesses can expose taxpayers to the risk of further bank bailouts, according to the U.S. Government.
A person close to Citigroup reportedly said its private-equity business does not conflict with the proposal, since most investing is done on behalf of customers and little of the bank's own capital is put at risk.
Citigroup, the nation's third largest bank, counts its remaining buyout and hedge funds among "core" operations that also include banking, trading, securities underwriting and credit cards.
The bank does not publicly disclose the performance of the unit. Managers of such funds typically charge fees for overseeing investors' money and take a fixed cut of any capital gains.
Other money-management units marked for sale or closure include the Citi Property Investors real-estate unit, which oversees $12.5 billion; and the Hedge Fund Management Group, which allocates money to hedge funds on behalf of its own investors, the people reportedly said.
Citigroup plans to keep Metalmark Capital LLC, a buyout firm the bank agreed to buy for an undisclosed sum in December 2007. Headed by former Morgan Stanley executive Howard Hoffen, Metalmark oversees almost $3.8 billion in several funds, one person said. It invests in energy, health care, financial and industrial companies, according to Metalmark's Web site.
Citigroup chief executive officer Vikram Pandit, decided to keep Metalmark because he preferred its management and strategy to those of Citi Private Equity, three people said.
The bank also is keeping another fund, Citi Venture Capital International, which focuses on China, India, Central and Eastern Europe and Latin America.
The bank shuttered or froze more than a dozen funds, including Pandit's Old Lane Partners fund, which Citigroup bought in 2007 for $800 million. Citigroup stopped reporting the alternative-investing division's results after the first quarter of 2008, when it had a net loss of $509 million.
C rose $0.08 or 2.47% and closed Friday's regular trading session at $3.32.
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