Berkshire Joins Group Bidding for Citi Consumer Loan Unit: WSJ

July 6, 2011

Warren Buffett’s Berkshire Hathaway Inc. has joined the group bidding for Citigroup Inc.’s consumer lending unit, the Wall Street Journal said Wednesday, citing people familiar with the matter.

Berkshire has joined the consortium consisting of private-equity investment firm Centerbridge Capital Partners LLC and Leucadia National Corp., which is in exclusive talks with Citigroup for the possible deal, the Journal said.

Citigroup has been trying to shed its OneMain consumer finance unit, previously named CitiFinancial, as part of its efforts to slim down after the financial crisis.

The third-largest U.S. bank needed $45 billion in U.S. government bailouts to survive the crisis. Since then Chief Executive Vikram Pandit has been trying to sell or wind down assets he considers not related to the bank’s core banking functions.

The Journal reported that OneMain could fetch more than $8 billion. The unit has a book value of about $2 billion, and comes with some $13 billion of assets.

A person familiar with the deal told Reuters in March that Citigroup is working on ways to help buyers finance the deal, including offering to arrange the necessary loans and bond offerings.

The consortium now including Berkshire plans to finance its purchase with a large equity payment and by borrowing “significant sums,” the Journal said, citing sources.

Citi declined to comment on the report, as did Centerbridge. Berkshire Hathaway did not immediately respond to a request for comment.

Berkshire, led by legendary 80-year-old investor Buffett, could bolster the consortium’s prospects to buy OneMain. Citigroup wants to sell the business to well-capitalized owners that can keep the business stable, people familiar with the matter told the Journal.

Buffett, often called the “Oracle of Omaha,” is one of the world’s richest men and leads a conglomerate that owns railroads, insurers and ice cream parlors.

He told investors at Berkshire Hathaway’s annual meeting this spring that he is on the prowl for acquisitions, and added that his company was looking at two deals similar in size to its $9 billion deal to buy the chemicals company Lubrizol Corp .

OneMain offers personal loans to individuals through its network of 1,300 branches throughout the United States. Citigroup considers it part of its “Citi Holdings” unit for assets it is trying to shed.

(Reporting by Sakthi Prasad in Bangalore, and Maria Aspan, Paritosh Bansal and Ben Berkowitz in New York; Editing by Lincoln Feast, Dave Zimmerman)

 

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