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Citigroup to buy Bisys for $1.45 bln
NEW YORK |
NEW YORK (Reuters) - Citigroup Inc. said on Wednesday it agreed to buy financial services provider Bisys Group Inc. BSG.N for $1.45 billion to offer more services to hedge funds and private equity firms.
The largest U.S. bank would keep Roseland, New Jersey-based Bisys' fund services and alternative investment services units. It will fold them into its global transaction services unit, which holds securities, processes stock and bond trades, and offers cash management services.
Citigroup plans to sell Bisys' retirement and insurance services units to private equity firm J.C. Flowers & Co. for about $645 million. Its net cost would thus be $800 million.
Bisys shareholders would receive $11.85 per share in cash, 3.3 percent more than Tuesday's closing price. They would also receive a 15 cent per share dividend payable by Bisys, netting an additional $18 million.
"Hedge funds, alternative investments and private equity is one of the fastest-growing segments in the managed money industry," said Neeraj Sahai, Citigroup's global head of securities and fund services, in an interview.
The transaction would end Bisys' nearly nine-month review of strategic alternatives.
Bisys employs about 5,000 people, divided roughly equally among units going to Citigroup and units going to Flowers, spokeswoman Amy Conti said.
J.C. Flowers specializes in financial services. It was founded by former Goldman Sachs & Co. partner J. Christopher Flowers. Last month, it helped lead a planned $25 billion privatization of SLM Corp. SLM.N, the student loan provider better known as Sallie Mae.
In morning trading on the New York Stock Exchange. Bisys rose 19 cents to $11.66. Citigroup rose 7 cents to $54.27.
Citigroup's transaction services unit typically generates about 7 percent of the New York-based bank's profit and revenue. In the first quarter, the unit's net income totaled $447 million on revenue of $1.65 billion.
Paul Galant took over the unit in March, amid a reorganization designed to streamline operations. The unit employs 22,000 to 23,000 people. Citigroup declined to say how many jobs might be cut following the merger.
"We see tremendous opportunities for synergies, both on the revenue side and the cost side," Sahai said.
Last month, Citigroup announced plans to cut 17,000 jobs to help reduce overall spending by $4.58 billion. Many cuts will affect middle- and back-office operations.
Citigroup expects the transaction to close in the second half, and add to earnings per share after the first year.
Bisys' sale follows a difficult year for the company.
Last April, Bisys restated three years of results amid accounting errors. In October, it agreed to pay $66.5 million to settle a lawsuit accusing it of misleading investors about its financial health. The next month, it agreed to pay $25.1 million to settle a U.S. Securities and Exchange Commission probe over alleged kickbacks involving mutual funds.
Citigroup's investment bankers handled the transaction for the bank. Bear Stearns & Co. and the law firm Skadden, Arps, Slate, Meagher & Flom LLP advised Bisys. Merrill Lynch & Co. and the law firm Paul, Weiss, Rifkind, Wharton & Garrison advised a committee of independent Bisys directors.
(Additional reporting by Michael Flaherty and Christian Plumb)
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