Thursday, September 13, 2007

Citi Working On A Big Deal?

Last December, CITI (C) CEO Charles Prince admitted his frustration with the lack of movement in the bank’s share price and defended his strategy of organic growth and targeted international acquisitions. Public dissatisfaction from shareholders including the bank’s largest investor, Saudi Arabia’s Prince Alwaleed bin Talal, to improve the bank’s performance had many speculating Prince would soon be "free to pursue other opportunities".

In July, Citi created unit to search the market for potential targets after striking several deals in Europe and elsewhere in recent months to reduce its dependence on the US consumer business.

In the past year Citi acquired UK internet bank Egg and investment manager Quilter, as well as a 20% stake in Turkey’s Akbank. Outside the UK, Citi acquired Old Lane, the US hedge fund run by former Morgan Stanley banker Vikram Pandit, and Nikko Cordial, the Japanese brokerage.

Now word comes that Lewis Kaden, former vice-chairman and chief administrative officer at Citi, has been given a new role to “work closely” with Prince on strategic opportunities as the bank steps up its focus in this area. Kaden joined Citi in 2005 from law firm Davis Polk & Wardwell, where he was a partner whose practice included corporate governance and mergers and acquisitions.

Rumors are that Citi is working on larger international deals and the Kaden move only gives more validity to them. This would be the time to get deals done. Valuations of financial firms of all types have been decimated the past month and a half and valuations are ripe for deals in all sectors of the industry as witnessed by Bank of America's (BAC) investment in Countrywide (CFC).

Citi's share price has been stagnant for over a year now and Prince needs to do something soon or he will be "free" so to speak. He is on borrowed time.


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