Citibank 2010 Annual Report Download - page 180

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2. BUSINESS DEVELOPMENTS
DIVESTITURES
The following divestitures occurred in 2008, 2009 and 2010 and do
not qualify as Discontinued operations. Divestitures that qualified as
Discontinued operations are discussed in Note 3 to the Consolidated
Financial Statements.
Sale of Primerica
In April 2010, Citi completed the IPO of Primerica and sold approximately
34% to public investors. In the same month, Citi completed the sale of
approximately 22% of Primerica to Warburg Pincus, a private equity firm.
Citi contributed 4% of the Primerica shares to Primerica for employee
and agent stock-based awards immediately prior to the sales. Citi retains
an approximate 40% interest in Primerica after the sales and records the
investment under the equity method. Citi recorded an after-tax gain on sale
of $26 million.
Concurrent with the sale of the shares, Citi entered into co-insurance
agreements with Primerica to reinsure up to 90% of the risk associated with
the in-force insurance policies.
Sale of Phibro LLC
On December 31, 2009, the Company sold 100% of its interest in Phibro
LLC to Occidental Petroleum Corporation for a purchase price equal to
approximately the net asset value of the business.
The decision to sell Phibro was the outcome of an evaluation of a variety
of alternatives and is consistent with Citi’s core strategy of a client-centered
business model. The sale of Phibro does not affect Citi’s client-facing
commodities business lines, which will continue to operate and serve the
needs of Citi’s clients throughout the world.
Sale of Citi’s Nikko Asset Management Business
and Trust and Banking Corporation
On October 1, 2009, the Company completed the sale of its entire stake in
Nikko Asset Management (Nikko AM) to the Sumitomo Trust and Banking
Co., Ltd. (Sumitomo Trust) and completed the sale of Nikko Citi Trust and
Banking Corporation to Nomura Trust & Banking Co. Ltd.
The Nikko AM transaction was valued at 120 billion yen (U.S. $1.3 billion
at an exchange rate of 89.60 yen to U.S. $1.00 as of September 30,
2009). The Company received all-cash consideration of 75.6 billion yen
(U.S. $844 million), after certain deal-related expenses and adjustments,
for its 64% beneficial ownership interest in Nikko AM. Sumitomo Trust also
acquired the beneficial ownership interests in Nikko AM held by various
minority investors in Nikko AM, bringing Sumitomo Trust’s total ownership
stake in Nikko AM to 98.55% at closing.
For the sale of Nikko Citi Trust and Banking Corporation, the Company
received all-cash consideration of 19 billion yen (U.S. $212 million at an
exchange rate of 89.60 yen to U.S. $1.00 as of September 30, 2009) as part of
the transaction, subject to certain post-closing purchase price adjustments.
Retail Partner Cards Sales
During 2009, Citigroup sold its Financial Institutions (FI) and Diners Club
North America credit card businesses. Total credit card receivables disposed
of in these transactions was approximately $2.2 billion. During 2010,
Citigroup sold its Canadian MasterCard business and U.S. retail sales finance
portfolios. Total credit card receivables disposed of in these transactions was
approximately $3.6 billion. Each of these businesses is in Local Consumer
Lending.
Joint Venture with Morgan Stanley
On June 1, 2009, Citi and Morgan Stanley established a joint venture (JV)
that combines the Global Wealth Management platform of Morgan Stanley
with Citigroup’s Smith Barney, Quilter and Australia private client networks.
Citi sold 100% of these businesses to Morgan Stanley in exchange for a 49%
stake in the JV and an upfront cash payment of $2.75 billion. The Brokerage
and Asset Management business recorded a pretax gain of approximately
$11.1 billion ($6.7 billion after-tax) on this sale. Both Morgan Stanley and
Citi will access the JV for retail distribution, and each firm’s institutional
businesses will continue to execute order flow from the JV.
Citigroup’s 49% ownership in the JV is recorded as an equity method
investment. In determining the value of its 49% interest in the JV, Citigroup
utilized the assistance of an independent third-party valuation firm and
utilized both the income and the market approaches.
Sale of Citigroup Technology Services Limited
On December 23, 2008, Citigroup announced an agreement with Wipro
Limited to sell all of Citigroup’s interest in Citi Technology Services Ltd.
(CTS), Citigroup’s India-based captive provider of technology infrastructure
support and application development, for all-cash consideration of
approximately $127 million. A substantial portion of the proceeds from
this sale will be recognized over the period in which Citigroup has a service
contract with Wipro Limited. This transaction closed on January 20, 2009
and a loss of approximately $7 million was booked at that time.
Sale of Upromise Cards Portfolio
During 2008, the Company sold substantially all of the Upromise Cards
portfolio to Bank of America for an after-tax gain of $127 million
($201 million pretax). The portfolio sold had balances of approximately
$1.2 billion of credit card receivables. This transaction was reflected in the
North America Regional Consumer Banking business results.
Sale of CitiStreet
On July 1, 2008, Citigroup and State Street Corporation completed the sale
of CitiStreet, a benefits servicing business, to ING Group in an all-cash
transaction valued at $900 million. CitiStreet is a joint venture formed in
2000 that, prior to the sale, was owned 50% each by Citigroup and State
Street. The transaction closed on July 1, 2008, and generated an after-tax
gain of $222 million ($347 million pretax).
Divestiture of Diners Club International
On June 30, 2008, Citigroup completed the sale of Diners Club International
(DCI) to Discover Financial Services, resulting in an after-tax gain of
approximately $56 million ($111 million pretax).
Citigroup will continue to issue Diners Club cards and support its brand
and products through ownership of its many Diners Club card issuers around
the world.
Sale of Citigroup Global Services Limited
In 2008, Citigroup sold all of its interest in Citigroup Global Services
Limited (CGSL) to Tata Consultancy Services Limited (TCS) for all-cash
consideration of approximately $515 million, resulting in an after-tax gain
of $192 million ($263 million pretax). CGSL was the Citigroup captive
provider of business process outsourcing services solely within the Banking
and Financial Services sector.
In addition to the sale, Citigroup signed an agreement with TCS for TCS
to provide, through CGSL, process outsourcing services to Citigroup and its
affiliates in an aggregate amount of $2.5 billion over a period of 9.5 years.