Metalmark to be acquired by Citigroup

PHILADELPHIA (Reuters) - Metalmark Capital Partners LP, a private equity firm created by former Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) executives, said it agreed to be acquired by Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) for an undisclosed price.

Metalmark said it would become part of Citi's alternative investments group, which manages capital on behalf of Citi, as well as third-party institutional and high net-worth investors.

The purchase of Metalmark, which focuses on middle-market deals, mark's the latest effort by Citi to expand its alternative investment group. Earlier this year, it acquired Carlton Hill Global Capital LLC, a fixed-income money manager focused on credit derivatives, and hedge fund Old Lane Partners

LP.

Old Lane's co-founder, Vikram Pandit, became Citi's head of investment banking, trading and alternative investments. Pandit is among the candidates being considered this week by Citi's board to become the bank's chief executive, a source familiar with the situation told Reuters previously.

"The relationship with Citi will allow Metalmark to tap Citi's extensive network of relationships across a wide array of industries and leverage Citi's deal flow, institutional banking platform, capital base and world-class intellectual capital," Metalmark said in a statement.

The private equity firm also said the deal would help it attract and retain executives.

Metalmark Chairman and CEO Howard Hoffen will serve as a Citi managing director and report to John Havens, the president and CEO of Citi Alternative Investments, according to an internal Citi memo obtained by Reuters.

Metalmark was created by executives of Morgan Stanley Capital Partners (MSCP) to manage Metalmark Capital and MSCP funds, which have invested $7 billion since 1986 in sectors such as industrials, health care, financial services, and natural resources.

(Reporting by Jessica Hall, editing by Leslie Gevirtz and Andre Grenon)