Buffett to Buy ING's Reinsurance Unit
Warren Buffett's Berkshire Hathaway agreed Friday to buy NRG, the reinsurance unit of Dutch bank ING, for 300 million euros ($435.2 million) in a deal that could mark the beginning of a trend of banks selling off non-core businesses in order to raise funds as they deal with the ongoing credit crunch.
The acquisition is Berkshire's second this week. On Tuesday, Berkshire agreed to pay Chicago's Pritzker family $4.5 billion for 60 percent of Marmon Holdings, a diversified conglomerate.
The deal also comes as Buffett is reported to be looking to start a municipal bond fund.
The acquisition of NRG is expected to close in the first half of 2008. ING said the sale of the unit is aimed at focusing on its core insurance, banking and asset management businesses.
Berkshire, which owns more than 70 businesses, is best known for its insurance holidings. Among them is Geico, the auto insurer, and reinsurers General Re and Berkshire Hathaway Reinsurance Group.
ING expects the sale to result in a 100 million euro ($147 million) aftertax loss in 2007, and an improvement of 0.47 percentage points in its debt-to-equity ratio in 2008.
ING plans to use sale proceeds to fund operations, previously announced acquisitions and a 5 billion euro share buyback program, an ING spokesman told Reuters.
Citigroup and HSBC could also look to shed assets, the Wall Street Journal reported on its Web site Thursday.
While Citigroup may sell or shut several of its mid-size units, HSBC could exit all or parts of its $13 billion auto finance business, the Journal reported, citing sources familiar with the situation.
Some executives estimate that Citigroup could dispose of as much as $12 billion worth of what are considered noncritical assets, according to the Journal.
Units it could possibly shed include Student Loan Corp., which is 80 percent owned by the bank; its North American auto lending business; Brazilian credit card company Redecard SA, in which Citigroup held a 24 percent stake as of Sept. 30; and its Japanese consumer finance business, according to the Journal.
New Citi Chief Executive Vikram Pandit's plans to streamline its operations include laying off about 20,000 employees and shedding business lines, the Journal reported, quoting people familiar with the matter.
Citi had already said in April that it was cutting about 5 percent of its work force, or 17,000 jobs, and there have been talks of cuts above that number.
Thee bank employs over 300,000 people in over 100 countries.
-- Reuters contributed to this report