Citigroup Inc. (C) is shedding its business again. The company is said to have reached a deal to sell its private-equity assets portfolio of $1.7 billion to AXA Private Equity, the buyout arm of the French group AXA.
The portfolio in consideration for sale comprises 207 limited-partnership interests in buyout funds, which include stakes in funds owned by KKR & Co. (KKR), Blackstone Group LP (BX), Carlyle Group, Providence Equity Partners and others, apart from direct stakes in around 20 companies.
A Win-Win Situation
The deal is a strategic fit for both Citi and AXA. Following the huge bailout that saved Citi from collapsing, the company hasrestructured its businesses into Citicorp – its portfolio of core assets, and Citi Holdings – the non-core assets portfolio, which the company is winding up. This run off ultimately frees up capital that the company needs to invest in its core businesses.
As a matter of fact, Citi has already sold out a number of its business units to get rid of its non-core assets. Citi Holdings’ assets declined 33% year over year to $337 billion at the end of first quarter 2011. Citi Holdings accounted for approximately 17% of total Citigroup assets at the first quarter end.
On the other hand, AXA has been making opportunistic acquisitions of private equity assets following the financial crisis. Last year, AXA had purchased a $1.9 billion portfolio of investments in private equity funds from Bank of America Corp. (BAC). The Wall Street companies have been shedding out their private equity interests in the midst of financial crisis and regulatory pressures.
Citi currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we maintain a long-term Neutral recommendation on the stock.
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