DealZone

Broad Support for Citi

February 27, 2009

CITIGROUP/Given Citigroup stock’s dizzying tumble toward nationalization (wipeout) levels, it would appear Uncle Sam’s conversion of Citi preferred shares into common broadly supported anyone shorting the stock. The government did a deal to convert $25 billion of its Citi preferred stock, giving it a stake of up to 36 percent in the bank.Other moves announced this morning also have a decidedly more managerial tone. The bank’s board is to be reconstituted. Other major shareholders, including the government of Singapore, said Uncle too, getting on board with the Treasury plan, which supporters will argue is better than no plan at all. Singapore was an early adopter of the failed investment strategy of bailing out the bank.Where we are in this latest wave of the financial tsunami is difficult to calculate. Globally, this week has seen tremendous activity between governments and banks. Lloyds Banking Group is prepared to tap a 500 billion pound ($715 billion) insurance scheme concocted by Britain to cleanse risky bank assets. And a deal struck yesterday could raise the British government’s holding in Royal Bank of Scotland to 95 percent. Global development banks have launched a two-year plan to lend up to 25 billion euros ($32 billion) to shore up banks and businesses in crisis-hit Eastern and Central Europe.The problem with lenders of last resort is that they are a monopoly and their doors can never close. Notice the queue of seemingly defunct businesses lining up for ever more cash, whether it be Fannie Mae looking for another $15 billion, or the $30 billion GM says it needs to forestall a meltdown of industrial proportions.Deals of the Day:* The chairman of China Huiyuan Juice Group, the country’s top juice maker, said he would meet with Coca-Cola Co executives next week to discuss their $2.5 billion bid for his company.* Beckman Coulter, a maker of medical test systems, said it agreed to acquire the diagnostic systems portion of Olympus Corp’s life sciences business for about $800 million to broaden its clinical chemistry offering.* Britain’s BG Group sweetened its offer for Australian coal seam gas firm Pure Energy, now valuing the company at A$1.03 billion ($671.9 million), in a bid to eliminate rival bidder Arrow Energy from the race.* Commodities trader Noble Group launched a takeover bid for Australia’s Gloucester Coal, valuing the miner at nearly A$400 million ($261 million), looking to thwart Gloucester’s planned merger with Whitehaven Coal.* Indonesian coal miner, PT Indika Energy Tbk said it agreed to buy an 81.95 percent stake in engineering firm PT Petrosea Tbk from Clough International Singapore Pte Ltd for $83.8 million.* China National Petroleum Corp launched a friendly C$443 million ($357 million) offer for Verenex Energy Inc to give the state-owned oil company a stake in a Libyan oil concession.* Coal miner Caledon Resources said it has received an indicative approach “significantly in excess” of its current market price.* UK-based NeutraHealth said it received an unsolicited offer from India’s Elder Pharmaceuticals, at an indicative partial offer price of 5.5 pence per share.(PHOTO: Workers are reflected in the window of a Citibank branch in London January 16, 2009. REUTERS/Toby Melville)

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