UPDATE 4-ING to buy CitiStreet for 578 mln euros

(Adds Citigroup gain on the deal)

AMSTERDAM/NEW YORK, May 2 (Reuters) - Dutch financial services group ING Groep NV (ING.AS: Quote, Profile, Research, Stock Buzz)(ING.N: Quote, Profile, Research, Stock Buzz) said on Friday it would buy retirement plan administrator CitiStreet, making it the third largest U.S. defined contribution business.

ING said it would pay 578 million euros ($903 million) for the company, which is jointly owned by Citigroup (C.N: Quote, Profile, Research, Stock Buzz) and State Street (STT.N: Quote, Profile, Research, Stock Buzz).

"It gives us a much more expanded footprint," Kathleen Murphy, chief executive of ING US Wealth Management, told Reuters.

"Because they serve such a large part of the defined contribution market they have $10 billion in rollover opportunities every year," Murphy said. "If we can recapture those into ING products over time, there is real revenue growth opportunity."

ING said the acquisition will boost earnings per share by 2010, excluding merger-related expenses and amortization of customer-based intangible assets.

Citigroup said when the deal closes it will record a gain of about $200 million after taxes as a result of the sale. The transaction is expected to close by the end of the third quarter, and comes as Citi looks to sell assets and slim down its balance sheet.

The combined operations of ING and CitiStreet will make it the third-largest defined contribution business in the United States with 224 billion euros assets under management and 14 million plan participants, ING said.

"Roughly 30 percent of the purchase price is attributable to the operational synergies from the combined operation," Murphy said. "I think there will be some redeployment and elimination of some redundant positions."