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Hedge Funds Unlikely to Break Up Citigroup, M&A Attorney Says


Dennis Block, co-chair of the corporate M&A practice at Cadwalader, Wickersham & Taft, told CNBC’s “Closing Bell” that activist shareholders are unlikely to break up Citigroup.

“It’s a wakeup call,” Block said Friday. “(Citigroup) has a very competent CEO who understands the need to get out there and explain why the business makes sense and how he’s going to grow it and how share price is going to be reflected by his activities.”

Tom Brown, chief executive officer of Second Curve Capital, argues that Citigroup should be broken into four companies: U.S. consumer finance, international consumer finance, investment banking and wealth management.

Shareholders have long complained that Citigroup’s stock doesn’t reflect the true value of the company. The complaints aren’t new – just louder.

Block said recent criticism of Citigroup’s performance isn’t necessarily a challenge to the supermarket model for large banks.

“The market doesn’t like businesses it can’t understand,” Block said. “It’s a lot easier to focus on a business that has one line. Citigroup, of course, has multiple lines and has to get its story out a little better and explain how it’s going to get its stock price up.”

Edward Chancellor, editor of breakingviews and author of Devil Take the Hindmost, said current chatter about Citigroup is little more than “well publicized rabble rousing.”

“For very large companies like Citigroup, it’s difficult to for hedge funds, even if they own the shares, to affect change,” Chancellor said. “What we normally see is the hedge funds taking on much smaller companies.”