Embattled Citigroup mulling sale, merger

As investors flee and stock drops under $5, board eyes all options; Morgan, Goldman seen as potential suitors

David Enrich / The Wall Street Journal

New York: Executives at Citigroup Inc., faced with a plunging stock price, began weighing the possibility of auctioning off pieces of the financial giant or even selling the company outright, according to people familiar with the matter.
The internal discussions are at a preliminary stage and don’t signal that Citigroup’s board and management are backing down from their insistence that the New York company has ample capital, funding and strategic direction, these people said.
But with the stock down another 26% on Thursday, its worst one-day percentage decline ever, Citigroup officials have decided they need to reckon with a range of scenarios that were unthinkable only weeks ago.
In early trading on Friday in New York, Citi shares were trading at $4.56 (Rs228).
Citigroup’s board of directors was scheduled to have a formal meeting on Friday in the US to discuss the options, according to people familiar with the situation.
The directors have also been talking by phone about what could be done to reverse the stock’s slide. Top executives were locked in meetings on Thursday to hash out a stabilization strategy.
Meanwhile, chief executive Vikram Pandit had scheduled a conference call for 8am on Friday to discuss the situation with senior managers. A Citigroup spokeswoman said in a statement on Thursday evening: “Citi has a very strong capital and liquidity position” and is “focused on executing our strategy”, which includes cutting expenses and selling assets. “We believe the benefits will be seen over time.”
With roots stretching back to 1812 and more than 200 million customer accounts in 106 countries, Citigroup is an icon of global capitalism. It is getting battered by the same financial storm that has already remade the face of Wall Street, forcing the sale of Bear Stearns Companies Inc. and Merrill Lynch and Co. earlier this year, and triggering the bankruptcy filing of Lehman Brothers Holdings Inc.

Pandit and other Citigroup executives have told colleagues they are frustrated and befuddled by this week’s 50% stock decline. Investors have dumped bank stocks en masse on fears that economic woes will batter financial companies worse than previously expected.

Weighing down the shares has been the US treasury department’s decision last week not to buy troubled assets from banks. Citigroup’s balance sheet includes battered securities and loans that many investors hoped could be offloaded to the government.
JPMorgan Chase and Co. shares slid 18% on Thursday, while Bank of America Corp. fell 14%. Citigroup fell $1.69 to $4.71 in New York Stock Exchange composite trading on Thursday. In early trading on Friday, JPMorgan was trading at $21.82, while Bank of America shares were at $11.28.

Source: Livemint