DealZone

Citi to sell assets. To whom?

Citigroup As Citi announced plans of a radical dismantling, CEO Vikram Pandit said he “will continue to look at all assets dispassionately.”

For some time to come, that might really be all that he can do when it comes to his plan to sell off non-core assets.

Citi said it will realign into two businesses, Citicorp and Citi Holdings, as it posted its fifth straight quarterly loss. Citicorp will focus on universal banking, the other on brokerage and retail asset management, local consumer finance, and a pool of assets that require special management.

The bank is considering selling off Citi Holdings’ assets or letting them mature on their own.

Selling off assets is likely to prove tough. The question is how will Citi find buyers for businesses that even it doesn’t want? And even if it does find a buyer, what will it get for those assets?

Dimon: never say never

Jamie DimonJPMorgan’s Jamie Dimon may have enough on his plate – for now.

With the bank still digesting its two major purchases from last year — Washington Mutual’s banking operations and Bear Stearns — Dimon seems ready to take a break from deals and focus on integration.  

A worsening economy is also keeping the industry on edge. “Common sense tells you it will get worse and we should prepare for that,” Dimon said on a conference call after the bank announced lower fourth-quarter profit. He said 7.5 percent to 8 percent unemployment is “the minimum we’ll see.”

JPMorgan is “not out there looking” for an acquisition. And there is nothing that the bank is looking to divest, Dimon said.  

Crystal ball: PE active in finance

Crystal ballHaving largely held off from picking up cheap financial services assets last year, private equity firms will boost their buying as low valuations make assets in the sector too attractive to pass up, a new report predicts.

The increased interest will come as these firms look for ways to  use funds raised in the last two years and regulators further loosen restrictions on ownership of banks, independent advisory firm Freeman & Co projects in its annual summary on transactions. Buyout shops have about $600 billion to work with.

Private equity tested the financial sector waters last year – and sometimes got burned. But they have continued to look at the sector with interest. Private equity firms put in $23 billion in 84 financial services deals last year, down 69 percent from 2007, Freeman said.

from Summit Notebook:

Pharma mega mergers? Just a sugar rush

Big pharma mega mergers are no way to escape looming loss of exclusivity on key drugs and pressure on prices. In fact, they're the last refuge of CEOs running out of ideas, reckons Bayer HealthCare's chief Arthur Higgins.   "I think the tendency is, when you're short of ideas, to go for a quick fix. It's a little like myself and a sugar rush. I feel good for about 10 minutes, then I wish I'd never taken the sugar," Higgins told the Reuters Health Summit. "I can't see any logic in combining two poorly performing businesses when at the heart what keeps it sustainable is innovation. And there's no relationship between scale and innovation."   What's more, the financial crisis threatens a long-held adage about the drug industry -- its defensive status in a downturn -- and while prices for acquisition targets may be plummeting, that does not necessarily mean the deal adds up to value.   "Traditionally healthcare has been somewhat cushioned in these economic times, but nobody knows the future any more. We all listen to the television, we all meet with experts, but this is completely outside people's experience," Higgins said. "I don't think any company at the moment is looking at major acquisitions. I think we're all going to take a pause and step back and look at the economic outlook in 2009."  

Who’s your boss, Mr. Liddy … and for how long?

Edward Liddy was appointed chief executive of insurer American International Group Inc within hours of a Sept. 16 government rescue, averting the 89-year-old insurer’s collapse.

On Monday, fifty-five days after stepping into the corner office, Liddy unveiled the company’s biggest-ever loss. Concurrently, the U.S. government restructured most elements of  its initial AIG bailout in favor of a new better-for-AIG scheme, overshadowing the bad quarterly news.

Under the revised plan, AIG gets easier repayment terms and, most importantly, the U.S. Treasury will sink $50 billion  into a fund that will buy and hold mortgage derivatives, including those underlying AIG credit default swaps — a thorny area that has led to massive losses for the insurer.

Yahoo’s deal with Google: Band-Aid

So Yahoo and Google scaled back the terms of their search advertising deal in what looks like a last-ditch, attempt — at least for Yahoo — to get it past U.S. regulators.

Some analysts called it the Band-Aid deal, while others said it smacks of desperation.

Frost & Sullivan’s digital media global director Mukul Krishna said the revised terms were “more of a Band-Aid than the extensive surgery” Yahoo needs.