DealZone

Happy Birthday, Vikram

January 14, 2009

FINANCIAL SUMMITWith the ink drying on Citi’s deal to sell Smith Barney to Morgan Stanley, the media bulls-eye is focusing on Citi CEO Vikram Pandit. “Citigroup’s board may have said it is standing behind CEO Vikram Pandit, but the general consensus on Wall Street is that he is running out of time,” CNBC’s Charlie Gasparino reported this morning. Pandit’s predecessor Chuck Prince certainly had boardroom support when the street turned against him, so tales of Pandit’s demise may not be too exaggerated, though they could not have been more callously timed. Today is Vikram Pandit’s 52nd birthday.

Of course, it’s a truism of corporate America that every CEO has the support of his board — until he doesn’t. And even if the current board is rock solid for Pandit, it’s an open question how safe the board’s own tenure is given the bank’s miserable track record — and the fact that Uncle Sam is now its top shareholder.

Citigroup, once the world’s largest bank, may announce plans on Jan. 22 to formally shed the “financial supermarket” approach once championed by former Chief Executive Sandy Weill, but which Pandit has now turned his back on.

Pandit is widely expected plans to refocus the bank on its core global banking business. But selling assets in Japan, China and Germany, as it has recently done, is no way to grow a global banking business. On top of that, the Wall Street Journal reported on Wednesday that the bank will focus on “large corporations and rich individuals.” But through the Morgan Stanley-Smith Barney joint venture agreed yesterday, it’s shedding a big chunk of its wealth management business. The question remains Pandit will need to answer, and quickly, is what exactly Citigroup is supposed to look like when the dust settles.

A person familiar with the plan tells us that Citi plans to adopt the equivalent of a “good bank, bad bank” structure, in which it would slim down to a business model recalling the former Citicorp. There’s another question. Who in their right mind is going to put money into bank for bad Citi assets? Why, the U.S. government, of course. If President-elect Obama was at all daunted by the resistance congress is showing to releasing the second $350 billion installment of TARP money, the direction Citi is headed may make selling TARP 2 even harder.

Other Deals News

* Chrysler is in talks to sell key assets to Renault-Nissanand auto supplier Magna according to people with knowledge of the discussions, though the French automaker denied such talks were under way.

* The German government is set to take a stake in Hypo Real Estate, sources with knowledge of the matter said, a move that would mark the second part-nationalisation of a German bank this year.

* Japan’s Toshiba said it is in talks to buy Fujitsu’s hard-disk drive business, a deal that would create the world’s largest maker of small hard drives and is reportedly worth $340-$450 million.

* German bank B. Metzler seel. Sohn & Co Holding AG and Merrill Lynch have taken combined voting stakes of 35.75 percent in Continental, the German automotive supplier said.

* A subsidiary of Egyptian telecom giant Orascom Telecom has bought Namibian mobile operator Cell One in a $59 million cash deal, OT said.

* Swedish engineering group Alfa Laval said it had bought one company and signed a deal to buy another.

(Photo:Vikram Pandit of Citigroup, photographed in 2004 when he worked for Morgan Stanley. REUTERS/Peter Morgan)

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