Citi to Vend Commitment in Metalmark to Lexington Partners


Bound by regulatory pressure, on Friday, Citigroup Inc. (C) announced that it inked a deal with investment firm Lexington Partners to vend 80% of its limited partnership interest worth $1.5 billion in Metalmark Capital Partners II (MCP II). Following the announcement of revised business terms between Citigroup and Metalmark in Dec 2013, Citi will continue to tender 20% of its limited partnership interest to existing MCP II limited partners.

The terms of the agreement with Lexington, which is anticipated to close in the fourth quarter of 2014, were not disclosed. Moreover, the deal awaits certain customary conditions.

Notably, Citigroup purchased the stake in Metalmark in 2007. The latter invests in middle market companies in the healthcare, energy and industrials sectors. Metalmark acquired $2.5 billion for Metalmark Capital Partners II LP, which included Citigroup’s obligation of $1.5 billion.

To abide by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Citigroup has taken the recent move of dropping its alternatives holdings in recent years. Notably, in 2013, Citi Venture Capital International was sold to Rohatyn Group for an undisclosed amount.

Streamlining of operations and efficiency improvements would aid Citigroup to accomplish its goals. Shedding of non-core operations would aid the bank in focusing on core operations, thereby aiding bottom-line expansion.

Recently, Citigroup reported impressive second-quarter 2014 results. Adjusted earnings per share came in at $1.24, outpacing the Zacks Consensus Estimate of $1.08. However, earnings were below the year-ago figure by a penny.

Results in the reported quarter were impacted by credit valuation adjustment (CVA) and debt valuation adjustment (DVA). Moreover, results included charges worth $3.8 billion ($3.7 billion after-tax) related to the aforementioned deal. Including these, Citigroup reported net income of $181 million or 3 cents per share in the second quarter compared with $4.2 billion or $1.34 per share in the prior-year quarter.

Following the dismal second-half 2013 performance, Citigroup began 2014 on a positive note and reported impressive results in the second quarter as well. Though revenues declined, on the whole, its profit level outpaced expectations.

Citigroup currently carries a Zacks Rank #3 (Hold). Some better-ranked finance stocks include Huntington Bancshares Inc. (HBAN), PrivateBancorp, Inc. (PVTB) and German American Bancorp Inc. (GABC). All three carry a Zacks Rank #2 (Buy).

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