Happy Thanksgiving, Citigroup

November 24, 2008

Thanksgiving has come early for embattled Citigroup. The second-largest U.S. bank by assets received a pardon of sorts from the government late on Sunday, getting a $20 billion lifeline – the biggest bank bailout yet.

The bank had been widely thought to be too big to fail because of its global reach. Chief Executive Vikram Pandit and other top management will keep their jobs, but the government will have the final say on executive pay packages.

Citigroup’s shares lost 20 percent of their value on Friday, closing at $3.77, down 60 percent for the week and reaching their lowest level since December 1992. The group’s market value fell to $20.5 billion. That’s a far cry from the good old days of late 2006 when the bank’s market value topped $270 billion.

Citigroup’s market value is now also in line with Goldman Sachs Group Inc. Which makes for interesting speculation: Might Goldman be interested in picking up its rival at current low prices? A person familiar with Goldman’s strategy said it was not interested, but CreditSights said an acquisition of Citigroup by Goldman or Morgan Stanley would significantly add to earnings, if Citi’s bad assets were absorbed by the U.S. government.

For now, Citigroup is alive. But the carving of the turkey may be just around the corner.

More Deals of the Day:

** China Life Insurance Co, the world’s biggest life insurer by market value, is interested in buying Asian assets of American International Group, a senior China Life manager briefed on the situation said.

** Johnson & Johnson Inc will acquire Israel’s Omrix Biopharmaceuticals Inc for $27 a share, or a total of $465 million, the Globes financial news website said.

** Major shareholders of Hynix Semiconductor picked Credit Suisse, Woori Securities and Korea Development Bank to lead manage the sale of 36 percent of the chip maker in a deal that could be worth about 968 billion won ($646 million) at current market prices.

** The United Arab Emirates began to bail out Dubai’s rattled lenders, consolidate its financial sector and cap a building spree as the former boomtown began cutting state spending in the face of the global crisis.

** Slovenian telecoms provider Telekom said on it hopes to buy Macedonian mobile phone operator Cosmofon, adding it was also looking for other takeover opportunities in the Balkans.

** Inhaled-drug specialist Vectura’s Chief Executive Chris Blackwell said the company is looking to make acquisitions to boost its pipeline, adding that it may consider non-inhaled products to do so.

** EADS agreed to keep for three years a majority stake in three German plants it had planned to sell, German newspaper Financial Times Deutschland reported, citing industry sources.

** Key details remain undecided about a government-led plan to restructure swathes of Dubai’s financial sector, Wasim Saifi, chief executive of Dubai-based mortgage lender Tamweel said.

** SSL International Plc, a maker of Durex condoms and Scholl footcare products, said it agreed to buy the Crest condom brand and related assets for 7 million Swiss francs ($5.72 million) in cash from privately owned Doetsch Grether AG.

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