Citigroup Inc.’s (C) consumer finance unit, CitiFinancial is up for sale and companies such as the Spanish bank––Banco Santander SA (STD), BlackRock Inc. (BLK) and over 10 private equity firms are said to be in the buyer’s race. The companies are forming groups to bid for the unit, according to a report by Bloomberg.
BlackRock and two private-equity firms, KKR & Co. and Warburg Pincus LLC, are said to be planning a joint bid and are trying to rope in Santander to their group. Santander already has its banking presence and is eying the US market for expansion. Consequently, we believe that its inclusion in the bidding would be a strategic one.
On the other hand, Citi’s former President, Robert Willumstad, is said to head another bidding group through his private-equity firm Brysam Global Partners. This group is said to comprise Blackstone Group LP (BX), Carlyle Group, Thomas H. Lee Partners LP and WL Ross & Co.
Last December, Citi Financial announced its intention to rename its U.S. Full Service Network business, which will begin operating under the new name ‘OneMain Financial’ in summer 2011. The re-branding is to give the company an identity that befits the company’s image and activity. The company also said that the new name reflects a localized business model and commitment to customers.
Citi was in bad shape during the financial crisis and had to resort to government bailout money. Since then, the company has been executing a number of strategic reengineering efforts. It has termed CitiCorp as its core operating unit and Citi Holdings as its non-core unit.
Citi intends to dispose of its non-core operations and CitiFinancial happens to be a part of this non-core unit. Hence, the change in name was viewed as a step toward the divestiture. Another biggie, Wells Fargo & Co. (WFC) has also disposed of its non-bank consumer-finance network as a part of its restructuring initiatives.
Citi currently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating.