Citigroup in talks to buy Pandit's Old Lane: sources

By Joseph A. Giannone

NEW YORK (Reuters) - Citigroup Inc. (C.N) is in talks to buy Old Lane LP, a hedge fund firm co-founded by Vikram Pandit, a move that would put the former Morgan Stanley (MS.N) executive on a short list to eventually run the largest U.S. bank, people familiar with the situation said.

The purchase price for Old Lane could top $600 million, those people said. Citigroup would add about $4 billion in assets under management in the deal, and would make Pandit chief executive of its alternative investments unit.

Citigroup declined to comment, and Old Lane did not return calls for comment.

The complex talks might break down because they involve an acquisition and management changes, the sources said. Citigroup may want to work out a deal before it reports first-quarter results on April 16 and holds its annual meeting the next day, they said.

Pandit was the highly regarded head of Morgan Stanley's institutional securities division, responsible for trading, underwriting and advisory businesses worldwide.

The India-born executive was once considered a potential successor to former Morgan Stanley chief executive Philip Purcell. Pandit quit in March 2005 after Purcell promoted two more junior executives -- fixed income trading head Zoe Cruz and investment banker Stephen Crawford -- as co-presidents.

Pandit led an exodus of more than two dozen senior bankers and traders and prompted eight former Morgan Stanley partners to call for Purcell's ouster. Purcell resigned under pressure in June, replaced by John Mack.

Pandit, who received $9 million in severance pay, later founded Old Lane with John Havens, the former global head of equities at Morgan Stanley. The New York-based firm also brought in Morgan's equities trading head, Guru Ramkrishnan.

Old Lane has kept a low profile since opening. It is best known for its investments in fast-growing India, which is also a key area of focus at Citigroup.

SHORT LIST

By joining Citigroup, Pandit could join a short list of potential successors to Chief Executive Charles Prince, who has been under fire from investors frustrated by the bank's lagging share price and operating performance.

Prince, 57, plans on Wednesday to unveil the results of a nearly four-month companywide review of expenses, possibly resulting in thousands of job cuts.

The alternative investments unit is the smallest of Citigroup's four main businesses, with about 875 employees. It has $49.2 billion of private equity, hedge fund, real estate and other assets, including $10.7 billion of Citigroup's own money.

Citigroup in January closed its second private-equity fund, raising $3.3 billion. The alternative investments unit is also home to Tribeca Global Management LLC, a hedge fund business launched in 2004 that now manages about $2.5 billion.

Citigroup has not had an alternative investments chief since Michael Carpenter left in March 2006. Chief Administrative Officer Lewis Kaden has overseen the unit on an interim basis.