(September 6) – “Citigroup became the latest high-profile financial services firm to go shopping Wednesday when it said it had agreed to buy Associates First Capital for $31.1 billion in stock,” writes Tim Arango in today’s New York Times.
“The deal significantly strengthens Citigroup’s international businesses and follows on the heels of recent mergers in the finance sector, including Credit Suisse First Boston’sbuyout of Donaldson Lufkin & Jenrette and UBS’acquisition of PaineWebber.”
“Under the terms of the deal, shareholders in Irving, Texas-based Associates First will receive 0.7334 common shares of Citigroup for each Associates share. The deal values Associates stock at $42.49 per share, or a 52.8% premium over Tuesday’s closing prices. Citigroup, based in New York, closed Tuesday at $57.94, up 25 cents, while Associates closed at $27.81, up 44 cents.”
“Shares of Associates First soared in pre-market trading, up over 40% at $39, according to Instinet. Citigroup fell to $56 in recent pre-market trading.”
“The deal, which is expected to close by the end of the year, will add at least 10 cents a share to Citigroup’s earnings in the first year of the combined operation, the company said in a statement.”
“Associates First, founded in 1918, has strong operations in Japan, where it is the fifth-largest consumer finance company, and in Europe, where it has over 700,000 customers. ‘In one step, we catapult our international earnings in these rapidly growing segments by more than 40%,’ Sanford Weill, Citigroup’s chairman and chief executive, said in a statement.”
“Associates First caters to the consumer market and concentrates on six major areas: commercial operations, credit cards, home lending, insurance and business development, international operations and U.S. consumer operations. The company has over $100 billion in assets, and 2,750 offices in the U.S. and 13 other countries. Citigroup, meanwhile, has more than $791 billion in assets and operates in over 100 countries.”
“Following the close of the transaction, Associates’ North American consumer finance operations will be combined with CitiFinancial, Citigroup’s consumer finance business, and Associates’ credit card operation will be combined with Citibank’s card operations. Keith Hughes, chairman and chief executive of Associates, will join Citigroup’s board of directors and become a Citigroup vice chairman. Roy Guthrie, senior executive vice president and chief financial officer at Associates, will have responsibilities that include the Associates’ current operations in commercial and international finance.”
“The deal is the latest for Weill, who has built a financial empire by steadily acquiring rival firms. He came to the helm of Citigroup through the 1999 merger with Travelers Insurance, a firm Weill bought in the early 1990s.”