Citi to sell $7.5b stake to ADIA
ABU DHABI — Citigroup has reached an agreement to sell equity units worth $7.5 billion to the Abu Dhabi Investment Authority (ADIA). The units are sold in a private placement to the investment arm of Abu Dhabi government.
With the new placement, ADIA's aggregate ownership in Citi's common shares, including the conversion of these equity units, will total no more than 4.9 per cent of Citigroup's total shares outstanding.
ADIA will have no special rights of ownership or control and no role in the management or governance of Citi, including no right to designate a member of the Citi Board of Directors.
Most of the investment proceeds will be treated as Tier 1 capital for regulatory capital purposes. Accordingly, it will support Citi's progress towards its goal of achieving its targeted capital ratios by the end of the first half of 2008.
Each equity unit is mandatorily convertible into Citi shares at prices ranging from $31.83 to $37.24 per share. The equity units conversion to Citi common shares on dates ranging from March 15, 2010, to September 15, 2011, subject to adjustment. Each equity unit will pay a fixed annual payment rate of 11 per cent, payable quarterly.
The payment rate reflects market terms based on the conversion premium as well as Citi's current dividend yield.
"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, Citi's Acting Chief Executive Officer.
"It builds on a series of actions we have taken over the past several months to strengthen our capital base, which have included sales of certain non-strategic assets, the issuance of trust preferred securities, and the previously announced plan to use common stock to purchase 32 per cent of Nikko Cordial in Japan. In addition, ADIA is a significant participant in alternative investments and emerging markets financial services, two areas in which we have major positions and have been expanding, Bischoff said.
He said that this investment also enables us to access capital in an efficient manner, and is consistent with our strategy of maintaining a balance sheet that benefits from highly diverse sources of funding in terms of both geography and type of security. "We see in Citi a highly respected company with a premier brand and with tremendous opportunities for growth," said ADIA's Managing Director, Shaikh Ahmed bin Zayed Al Nahyan.