Citibank 2011 Annual Report Download - page 175

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2. BUSINESS DIVESTITURES
The following divestitures occurred in 2009, 2010 and 2011 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, which was part of Citi
Holdings, and sold approximately 34% to public investors. Also in April
2010, 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 retained an approximate 40% interest in Primerica after the
sales and recorded 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. During 2011, Citi sold its remaining shares in
Primerica for an after-tax loss of $11 million.
Sale of Phibro LLC
On December 31, 2009, the Company sold 100% of its interest in Phibro
LLC, which was part of Citicorp—Securities and Banking, 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 was consistent with Citi’s core
strategy of a client-centered business model. The sale of Phibro did not affect
Citi’s client-facing commodities business lines, which 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 (Nikko Citi Trust) to Nomura Trust & Banking Co. Ltd.
Nikko AM and Nikko Citi Trust were part of Citi Holdings.
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, 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.
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 was in Citi Holdings.
Joint Venture with Morgan Stanley
On June 1, 2009, Citi and Morgan Stanley established a joint venture (JV)
that combined 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. Citigroup
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 upon
acquisition and utilized both the income and the market approaches.