Just enough for the Citi

April 30, 2008

citigroup.jpgCitigroup‘s $3 billion $4.5 billion stock offering didn’t exactly dazzle one of its most well-known critics, as Oppenheimer analyst Meredith Whitney said the company will need to raise an additional $10 billion to $15 billion or sell assets worth billions to truly shore up its capital position. “The fact that Citi raised capital at this time did not come as a surprise to us, but the fact that the company raised such a small amount of capital at this time confounds us,” said Whitney, who correctly predicted last year that the company would have to cut its dividend.

Time Warner is kissing its majority-owned cable division goodbye, part of CEO Jeffrey Bewkes’s attempt to revamp the company and lift its sluggish stock price. Details on how the transaction will be structured were scarce, but analysts have speculated that the separately listed unit could be spun off to shareholders.

UK gas producer BG Group has made a $12 billion bid approach to Origin Energy, seeking to bolster its position in the fast-growing Asia-Pacific gas market by securing the Australian utility’s gas reserves. The companies said BG, valued at around $85 billion, had approached Origin with a proposal of A$14.70 per share in cash — a 40 percent premium to Origin’s close of A$10.47 on Tuesday.

* Huaneng Power, China’s largest independent electricity provider, said it will buy Singapore’s Tuas Power from its parent China Huaneng Group in a deal worth about $3 billion.

** Carmaker Daimler is buying a 22.3 percent stake in heavy diesel engine maker Tognum from Swedish investment group EQT for around 585 million euros ($911.2 million), Daimler said.

** Malaysian state investment arm Khazanah Nasional Bhd will buy a stake of 16.41 percent in Singapore healthcare service provider Parkway Holdings Ltd for S$531.51 million ($389.5 million), Khazanah said.

** Indian drugmaker Dr Reddy’s Laboratories Ltd said it had agreed to acquire BASF’s drug contract manufacturing business and a related facility in the United States for an undisclosed amount.

** Philippine National Bank (PNB) and Allied Banking Corp, both owned by tycoon Lucio Tan, announced a long-awaited merger, and said the new entity would the fourth-largest bank in the country.

** Thailand’s Siam Cement Group PCL (SCC) said it planned to buy outstanding shares of Thai Cane Paper from minority shareholders at 16.0 baht each ($0.504) and would delist the paper firm.

** Daimler AG has reached a preliminary agreement to set up a truck-making joint venture with Beiqi Foton Motor Co in China, the Chinese company said.

** SMR, the mining unit of Russian billionaire Oleg Deripaska’s Basic Element company, has pulled out of negotiations with the Serbian government about the sale of copper miner RTB Bor, the company said.

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In an effort to rebuild its capital resources and to restore its balance sheets, Citigroup Inc announced on Wednesday that it will make a $4.5 billion public offering of common stock. Given the billions of dollars that the bank lost as a result of the subprime mortgage, it’s not surprising that the bank should be replenishing its coffers. The bank also recently offered an issuance of $6 billion of preferred stock. “We were pleased to increase the offering size to $4.5 billion in response to strong demand from a broad base of investors,” said Citi CFO Gary Crittenden. “This optimizes our capital structure and further strengthens our balance sheet,” he added. The Directors must now develop a strategic plan that will reverse the bank’s downward decline and that will make certain that the investors’ money results in future earnings for the bank.


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