Citibank 2008 Annual Report Download - page 140

2. BUSINESS DEVELOPMENTS
STRATEGIC ACQUISITIONS
North America
Acquisition of ABN AMRO Mortgage Group
In 2007, Citigroup acquired ABN AMRO Mortgage Group (AAMG), a
subsidiary of LaSalle Bank Corporation and ABN AMRO Bank N.V. AAMG is a
national originator and servicer of prime residential mortgage loans. As part
of this acquisition, Citigroup purchased approximately $12 billion in assets,
including $3 billion of mortgage servicing rights, which resulted in the
addition of approximately 1.5 million servicing customers. Results for AAMG
are included within Citigroup’s North America Consumer Banking
business from March 1, 2007 forward.
Acquisition of Old Lane Partners, L.P.
In 2007, the Company completed the acquisition of Old Lane Partners, L.P.
and Old Lane Partners, GP, LLC (Old Lane). Old Lane is the manager of a
global, multi-strategy hedge fund and a private equity fund. Results for Old
Lane are included within ICG, from July 2, 2007 forward.
On June 12, 2008, Citigroup announced the restructuring of Old Lane and
its multi-strategy hedge fund (the “Fund”) in anticipation of redemptions by
all unaffiliated, non-Citigroup employee investors. To accomplish this
restructuring, Citigroup purchased substantially all of the assets of the Fund
at fair value on June 30, 2008. The fair value of assets purchased from the
Fund was approximately $6 billion at June 30, 2008.
Acquisition of BISYS
In 2007, the Company completed its acquisition of BISYS Group, Inc.
(BISYS) for $1.47 billion in cash. In addition, BISYS’ shareholders received
$18.2 million in the form of a special dividend paid by BISYS
simultaneously. Citigroup completed the sale of the Retirement and
Insurance Services Divisions of BISYS to affiliates of J.C. Flowers & Co. LLC,
making the net cost of the transaction to Citigroup approximately $800
million. Citigroup retained the Fund Services and Alternative Investment
services businesses of BISYS, which provides administrative services for hedge
funds, mutual funds and private equity funds. Results for BISYS are included
within Citigroup’s Transaction Services business from August 1, 2007
forward.
Acquisition of Automated Trading Desk
In 2007, Citigroup completed its acquisition of Automated Trading Desk
(ATD), a leader in electronic market making and proprietary trading, for
approximately $680 million ($102.6 million in cash and approximately
11.17 million shares of Citigroup common stock). ATD operates as a unit of
Citigroup’s Global Equities business, adding a network of broker-dealer
customers to Citigroup’s diverse base of institutional, broker-dealer and retail
customers. Results for ATD are included within Citigroup’s Securities and
Banking business from October 3, 2007 forward.
Japan
Nikko Cordial
Citigroup began consolidating Nikko Cordial’s financial results and the
related minority interest on May 9, 2007, when Nikko Cordial became a
61%-owned subsidiary. Citigroup later increased its ownership stake in Nikko
Cordial to approximately 68%. Nikko Cordial results are included within
Citigroup’s Securities and Banking,and Global Wealth Management
businesses.
On January 29, 2008, Citigroup completed the acquisition of the
remaining Nikko Cordial shares that it did not already own by issuing
175 million Citigroup common shares (approximately $4.4 billion based on
the exchange terms) in exchange for those Nikko Cordial shares. The share
exchange was completed following the listing of Citigroup’s common shares
on the Tokyo Stock Exchange on November 5, 2007.
Latin America
Acquisition of Grupo Financiero Uno
In 2007, Citigroup completed its acquisition of Grupo Financiero Uno
(GFU), the largest credit card issuer in Central America, and its affiliates.
The acquisition of GFU, with $2.2 billion in assets, expands the presence
of Citigroup’s Latin America Consumer Banking franchise, enhances its
credit card business in the region and establishes a platform for regional
growth in Consumer Finance and Retail Banking. GFU has more than one
million retail clients and operates a distribution network of 75 branches and
more than 100 mini-branches and points of sale. The results for GFU are
included within Citigroup’s Global Cards and Latin America Consumer
Banking businesses from March 5, 2007 forward.
Acquisition of Grupo Cuscatlán
In 2007, Citigroup completed the acquisition of the subsidiaries of Grupo
Cuscatlán for $1.51 billion ($755 million in cash and 14.2 million shares of
Citigroup common stock) from Corporacion UBC Internacional S.A. Grupo
Cuscatlán is one of the leading financial groups in Central America, with
assets of $5.4 billion, loans of $3.5 billion, and deposits of $3.4 billion.
Grupo Cuscatlán has operations in El Salvador, Guatemala, Costa Rica,
Honduras and Panama. The results of Grupo Cuscatlán are included from
May 11, 2007, forward and are recorded in Latin America Consumer
Banking.
Agreement to Establish Partnership with Quiñenco—
Banco de Chile
In 2007, Citigroup and Quiñenco entered into a definitive agreement to
establish a strategic partnership that combines Citigroup operations in Chile
with Banco de Chile’s local banking franchise to create a banking and
financial services institution with approximately 20% market share of the
Chilean banking industry. The transaction closed on January 1, 2008.
Under the agreement, Citigroup sold Citigroup’s Chilean operations and
other assets in exchange for an approximate 32.96% stake in LQIF, a wholly
owned subsidiary of Quiñenco that controls Banco de Chile, and is accounted
for under the equity method of accounting. As part of the overall transaction,
Citigroup also acquired the U.S. branches of Banco de Chile for
approximately $130 million. Citigroup has entered into an agreement to
acquire an additional 17.04% stake in LQIF for approximately $1 billion
within three years. The new partnership calls for active participation by
Citigroup in the management of Banco de Chile including board
representation at both LQIF and Banco de Chile.
Asia
Acquisition of Bank of Overseas Chinese
In 2007, Citigroup completed its acquisition of Bank of Overseas Chinese
(BOOC) in Taiwan for approximately $427 million. BOOC offers a broad
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