Citigroup Born: Largest Corporate Merger in History

Strategic Insights -

In a groundbreaking deal worth $140 billion, Citicorp and Travelers Group announced a merger that surpasses all previous records, creating a new entity called Citigroup. The combined company will have assets of $700 billion, net revenues of almost $50 billion, an operating income of about $7.5 billion, and equity of more than $44 billion. This colossal merger will serve over 100 million customers in 100 countries, employing the Travelers trademark red umbrella.

Key Takeaways:

  • The merger creates the world's largest financial services company, with assets of $700 billion and net revenues of almost $50 billion.
  • Citigroup will have two co-chairmen and co-CEOs, John Reed and Sanford Weill, who will share equal status and decision-making power.
  • The deal must be approved by the Federal Reserve Board, which is expected to provide a straightforward closing, with an estimated timeline of three months.
  • The Glass-Steagall Act prohibition against banks entering the insurance business may be relaxed, pending legislative reform, which could be achieved within the next five years.
  • Citigroup will have a "breathing space" of five years to comply with the existing laws, during which period it will be allowed to retain and operate all businesses, with potential extensions for up to three one-year periods.
  • The merger will create a unique model for the financial services company of the future, as envisioned by Sanford Weill.
  • Citigroup will be a leading issuer of credit cards, with Citicorp valued at $70 billion.
  • Both Citicorp and Travelers Group have significant track records, with notable deals such as the Smith Barney-Salomon Brothers merger.
  • Analysts expressed concerns about the will of the two chairmen to work together, but the issue was handled positively by both John Reed and Sanford Weill.

Statistics:

  • $140 billion - the value of the corporate merger
  • 100 million - the number of customers served by Citigroup
  • 100 countries - the number of countries where Citigroup will operate
  • $700 billion - the assets of Citigroup
  • $50 billion - the net revenues of Citigroup
  • $7.5 billion - the operating income of Citigroup
  • $44 billion - the equity of Citigroup
  • 2.5 - the exchange ratio for Citicorp shares for each share of Citigroup
  • $70 billion - the value of Citicorp
  • 50% - the ownership stake of each company's shareholders in the combined entity

Sources:

  • "Citigroup is Born: Largest Corporate Merger in History", The Times, 1998
  • "Citicorp and Travelers Group Announce Merger", The Times, 1998
  • "John Reed and Sanford Weill: The New Co-Chairmen and Co-CEOs of Citigroup", The Times, 1998