Citigroup has agreed to acquire BISYS Group, a provider of outsourcing solutions to the financial services sector, for $1.47 billion in cash, or $11.85/share, which is a 3.3% premium to its Tuesday close of $11.47. Citi will pay a $0.15/share dividend when the transaction is completed. In addition, it will sell BYSYS's retirement and insurance services division to buyout firm J.C. Flowers, resulting in a net acquisition cost of $800m. Citi plans to combine BYSYS's Fund Services and Alternative Investment Services units, which service mutual funds, hedge funds, private equity and the like, with its own operations. Citi's Co-President of Markets and Banking said the firms are a "great fit," commenting how "BISYS's Investment Services division propels Citi into a market leading position in hedge fund administration and mutual fund servicing, and integrating it into Citi’s global network will extend our full service client platform ...." The deal is expected to close in the second half of this year, subject to BISYS shareholder and various regulatory approvals. Citi said it is expected to be neutral to EPS in the first year and accretive thereafter. BISYS last traded at $11.90 (+3.75%) in pre-market activity and Citi was up 0.5% over Tuesday's close at $54.49.
Sources: Press release (i, ii), Bloomberg, The Wall Street Journal
Commentary: Citigroup Execs Fear Activist Hedge Fund Targeting • Citigroup Executives Resist Calls for Breakup • Bisys Group: Okumus Discloses 10.4% Stake, Seeks Seat on Board
Stocks/ETFs to watch: Citigroup (NYSE:C), The BISYS Group (BSG). Competitors: SEI Investments (NASDAQ:SEIC), Electronic Data Systems (NASDAQ:EDS), State Street (NYSE:STT), Bank of America (NYSE:BAC), JP Morgan Chase (NYSE:JPM), HSBC (HBC). ETFs: DIAMONDS Trust, Series 1 (NYSEARCA:DIA), iShares Dow Jones US Financial Services (NYSEARCA:IYG), Financial Select Sector SPDR (NYSEARCA:XLF), KBW Bank ETF (NYSEARCA:KBE)
Conference call transcripts: Citigroup Q1 2007
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