Citigroup chiefs fear push for break-up
Citigroup chiefs fear push for break-up
By David Wighton in New York
Copyright The Financial Times Limited 2007
Published: April 29 2007 22:09 | Last updated: April 29 2007 22:09
Senior Citigroup executives fear the world’s biggest financial services company could become the target of activist hedge funds that would press for it to be broken up.
The executives believe Citigroup needs to step up its investor relations and explain better to shareholders the value of keeping its businesses together.
Many have dismissed the possibility that Citigroup, valued at $260bn, could become an activist target. But one Citigroup executive said: “Even Citigroup is not too big. It’s not impossible.”
Concerns have heightened following the campaign by The Children’s Investment Fund, an activist investor group, to force the break-up of ABN Amro, the Dutch banking group. This has resulted in a bid battle between Barclays and a consortium of banks seeking to break it up.
Chuck Prince, Citigroup’s chief executive, is under pressure to boost its stagnant share price. Critics say the group is too big and complex to manage and that smaller specialist financial companies tend to perform better.
Tom Brown, a former Wall Street banking analyst turned hedge fund manager, says long-term performance would improve if the group were split into four: US consumer finance; international consumer finance; investment banking; and wealth management. There would also be an immediate increase in shareholder value if it were split into separately traded companies. Mr Prince argues that there is significant value in having the businesses together. But one senior executive said that strategy needed to be “articulated better”.
Mr Brown complains that Mr Prince “has ventured the view, without elaboration, that the notion of a Citigroup break-up is stupid”.
Allies say Mr Prince has provided detailed evidence on why the group should not be broken up – at a presentation in December in which he also outlined the many ways in which he is trying to get its business “silos” to work more closely together. The recently announced restructuring involves much greater sharing of support functions between the businesses. Some critics believe activist investors should move now before it becomes more difficult to split up.
Senior executives have heard rumours of activist interest focused either on a break-up or on Mr Prince’s leadership. But there has been no sign of stake-building on the share register.
Although Citigroup has an active investor relations programme, senior executives believe it needs to do more to reassure its biggest investors.
Gary Crittenden, the recently appointed chief financial officer, is meeting Citigroup’s largest shareholders to gauge feelings among its core investors. Many are frustrated at the slow progress of Mr Prince’s efforts to transform the group, but the share price has picked up recently, helped by the announcement of 17,000 job cuts and strong first-quarter figures.
William Smith, a persistent critic of Mr Prince, said the results had brought Citigroup’s chief “a little breathing room”.
By David Wighton in New York
Copyright The Financial Times Limited 2007
Published: April 29 2007 22:09 | Last updated: April 29 2007 22:09
Senior Citigroup executives fear the world’s biggest financial services company could become the target of activist hedge funds that would press for it to be broken up.
The executives believe Citigroup needs to step up its investor relations and explain better to shareholders the value of keeping its businesses together.
Many have dismissed the possibility that Citigroup, valued at $260bn, could become an activist target. But one Citigroup executive said: “Even Citigroup is not too big. It’s not impossible.”
Concerns have heightened following the campaign by The Children’s Investment Fund, an activist investor group, to force the break-up of ABN Amro, the Dutch banking group. This has resulted in a bid battle between Barclays and a consortium of banks seeking to break it up.
Chuck Prince, Citigroup’s chief executive, is under pressure to boost its stagnant share price. Critics say the group is too big and complex to manage and that smaller specialist financial companies tend to perform better.
Tom Brown, a former Wall Street banking analyst turned hedge fund manager, says long-term performance would improve if the group were split into four: US consumer finance; international consumer finance; investment banking; and wealth management. There would also be an immediate increase in shareholder value if it were split into separately traded companies. Mr Prince argues that there is significant value in having the businesses together. But one senior executive said that strategy needed to be “articulated better”.
Mr Brown complains that Mr Prince “has ventured the view, without elaboration, that the notion of a Citigroup break-up is stupid”.
Allies say Mr Prince has provided detailed evidence on why the group should not be broken up – at a presentation in December in which he also outlined the many ways in which he is trying to get its business “silos” to work more closely together. The recently announced restructuring involves much greater sharing of support functions between the businesses. Some critics believe activist investors should move now before it becomes more difficult to split up.
Senior executives have heard rumours of activist interest focused either on a break-up or on Mr Prince’s leadership. But there has been no sign of stake-building on the share register.
Although Citigroup has an active investor relations programme, senior executives believe it needs to do more to reassure its biggest investors.
Gary Crittenden, the recently appointed chief financial officer, is meeting Citigroup’s largest shareholders to gauge feelings among its core investors. Many are frustrated at the slow progress of Mr Prince’s efforts to transform the group, but the share price has picked up recently, helped by the announcement of 17,000 job cuts and strong first-quarter figures.
William Smith, a persistent critic of Mr Prince, said the results had brought Citigroup’s chief “a little breathing room”.
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