GLOBAL - Citigroup has signed a deal with Legg Mason to swap its asset management business for the Baltimore based firm's broker-dealer unit, marking the end of an era for Citigroup's financial supermarket model.
“After careful review, we determined that our emphasis should continue to be on expanding access to best-in-class investment products, rather than on manufacturing proprietary asset management products,” said Robert B. Willumstad, president and COO of Citigroup.
Citigroup will sell substantially all of its asset management business in exchange for the broker-dealer business of Legg Mason, approximately US$1.5bn of Legg Mason's common and convertible preferred shares, and approximately US$550m in the form of a five-year loan facility provided by Citigroup Corporate and Investment Banking.
The transaction does not include Citigroup’s asset management business in Mexico, its retirement services business in Latin America or its interest in the CitiStreet joint venture.
The total value of the transaction is approximately US$3.7bn and will result in an after-tax gain to Citigroup upon closing of approximately US$1.6bn, both of which are subject to adjustment.
Citigroup and Legg Mason have entered into a three-year global agreement under which Citigroup will continue to offer its clients Asset Management’s products and in addition, inherit Legg Mason Wood Walker’s position as the primary domestic provider of Legg Mason’s equity fund family, including the top performing equity funds of Legg Mason Capital Management managed by Bill Miller.
These will be offered through Citigroup’s Global Wealth Management businesses, Smith Barney and the Citigroup Private Bank, as well as Primerica and Citibank. All offerings will be subject to usual suitability and performance standards.
Citigroup was advised by Citigroup Corporate and Investment Banking and Skadden, Arps, Slate, Meagher & Flom LLP.
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