Citigroup's OneMain Sale Enters Round Two
The auction for CitiFinancial’s subprime consumer lending unit has moved into round two, according to two people familiar with the situation.
Roughly a dozen parties showed interest in the first round. Bids for the second round are not due for several weeks.
Blackstone Group is among the firms that has moved to round two, a source familiar with the process said.
A key milestone will be next week’s management presentations. OneMain executives will need to make a strong argument for growth in the sector at a time when nearly every bank with exposure to subprime has gotten out of it.
Comparable deals provide little excitement. AIG last year sold its American General Financial Services unit to Fortress Investment Group at an amount that valued the group around 10 percent of its $2.1 billion book value. Bank of America Merrill Lynch pulled the sale of its mortgage insurance business after prices came in below expectations.
A source familiar with the process said that Citi reserves the right to hold onto the unit and run it for a while, or to seek an initial public offering as it did with its Primerica unit in April 2010. Management at the bank has said previously that the assets in Citi Holdings—the “bad bank”—are earmarked for sale. Citi would offload them in whatever way is most advantageous to shareholders.
A sale of OneMain would have be an investment-grade leveraged buyout, since consumer-lending businesses have backing from the Federal Deposit Insurance Corporation.
It was thought that Citigroup would provide staple financing for the deal—to keep confidential information about the unit from being circulated in the market. Two of the people familiar with the sale said that had yet to be decided.