Citi to transfer private equity businesses to StepStone Group, Lexington Partners

Citi to sell private equity businesses

NEW YORK — Citigroup Inc. on Tuesday said it will sell its private equity businesses and the management of certain funds to two private equity firms.

In addition to their management, Citigroup said it is transferring “certain proprietary interests” in its $4 billion fund of funds, mezzanine funds, feeder funds and co-investment businesses to StepStone Group LLC and Lexington Partners.

Financial terms for the deals, expected to close in the fourth quarter, were not disclosed.

The transaction is part of Citi’s strategy to reduce noncore businesses.

Last year, the New York financial institution split itself into two parts, Citicorp — its retail banking operations — and Citi Holdings, which held noncore businesses the bank planned to sell, and riskier assets including the mortgage-backed securities that helped sink the bank in the 2008 financial crisis.

The private equity business and the funds being sold off are part of Citi Holdings. The transaction will reduce the unit’s assets by about $1.1 billion.

Citi Holdings had about $547 billion worth of assets at the end of 2009, but has since divested some assets, including the April spin-off of Primerica, an insurance and financial planning business.

Last month, Citi said it will close 330 branches of its U.S. consumer finance business as part of a restructuring aimed at finding a buyer for the unit. The bank also plans to sell the remaining stake in its Smith Barney brokerage venture to Morgan Stanley, which owns the other half.

Citigroup received $45 billion in government bailout money at the height of the financial crisis. It raised $20 billion in December to help repay the money it received as part of the Troubled Asset Relief Program. The remaining $25 billion was converted to stock last fall. The Treasury Department had sold about 2.6 billion shares of the stock as of July 1, and currently holds about 5.1 billion shares, worth nearly $22 billion, which it plans to continue to sell.

In morning trading, Citi shares gained 10 cents, or 2.6 percent, to $4.21. The stock has traded between $2.56 and $5.43 in the past 52 weeks.