Citigroup Inc. reached an agreement to sell its OneMain financial arm to Springleaf Holdings Inc. in a $4.25-billion cash deal, creating the largest US subprime lender.
The transaction is expected to be finalized in the third quarter of the fiscal year and is subject to approval by US regulatory authorities. According to Citigroup, the disposal of OneMain will help it add about $1 billion to pretax earnings, while Springleaf anticipates a boost to 2015 net income.
According to Springleafs statement, the combined entity is expected to have a total of 2.5 million customers, making it the largest subprime lender in the US. After the finalization of the transaction, the combined company will have nearly 2 000 branches located in 43 states and total assets estimated to more than $15 billion.
“We look forward to welcoming OneMain’s talented team members as we build on our mutual success to enhance the growth potential of the combined company,” said Jay Levine, Springleafs chief executive.
Citigroup has been following a policy of divesting assets, having sold more than $700 billion of assets, including insurance and retail-brokerage divisions.
Citigroup Chief Executive Officer Mr. Michael Corbat said in the companys statement: “Today’s announcement is a significant milestone in the simplification of our company. While this business didn’t fit our strategy, it serves customers who deserve and need credit.”
Citigroup Inc. traded 0.59% lower at 15:28 GMT in New York at $53.42, marking a one-year change of +9.39%. The company is valued at $163.01 billion. According to the Financial Times, the 23 analysts offering 12-month price targets for Citigroup Inc have a median target of $61.00, with a high estimate of $73.00 and a low estimate of $54.00. The median estimate represents a 13.53% increase from the previous close of $53.73.
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