Citigroup To Sell OneMain Financial To Springleaf For $4.25 Bln

(RTTNews) - Citigroup Inc. (C) said Tuesday it has agreed to sell its consumer lending unit OneMain Financial Holdings, Inc. to subprime lender Springleaf Holdings (LEAF) for $4.25 billion in cash.

Springleaf noted that the transaction will enhance scale and expand its presence to almost 2,000 branches across 43 states. The combination will create a personal finance company with almost $14 billion in net finance receivables.

Baltimore-based OneMain Financial, formerly known as CitiFinancial, provides personal loans from more than 1,100 branches nationwide across 43 states. OneMain Financial is part of Citi Holdings, the unit created by Citigroup after the 2008 financial crisis to house its bad assets.

With roots dating back to 1912, OneMain has a long history in the personal finance business and over the years has acquired companies such as the Associates and Washington Mutual Finance. Founded originally as Commercial Credit, the company has about 5,600 employees.

The transaction, approved by the boards of directors of both companies, is expected to close in the third quarter of 2015.

Since its creation, Citigroup has sold more than 60 businesses and reduced assets in Citi Holdings by more than $700 billion. As of December 31, 2014, Citi Holdings' assets represented about 5 percent of total Citigroup assets, down from a peak of more than 30 percent.

Citigroup had tried to sell OneMain more than two years ago, but reportedly failed to reach a deal with the bidders at that time. In October 2014, OneMain filed for an initial public offering. Citigroup was also reportedly planning to explore a sale of the unit at the same time, in what is known as a dual-track process.

Citigroup said Tuesday that it will use a part of the proceeds from the sale of OneFinancial to retire certain funding that currently supports Citi Holdings. The company expects the sale, along with retirement of the related funding, to result in a net addition to earnings before income taxes of about $1 billion.

Citigroup will announce its first quarter of 2015 results on April 16, 2015.

Evansville, Indiana-based Springleaf Holdings, majority-owned by private equity firm Fortress Investments Group LLC (FIG), is a provider of consumer finance and credit insurance products that went public in 2013. The company has nearly 830 branches in 26 states.

Springleaf noted that on a pro forma basis as of September 30, 2014, the combined company would have had $13.96 billion in core consumer net finance receivables. At closing, the combined company is expected to have 1,967 branches across 43 states.

Upon closing, Springleaf expects the transaction to be accretive to its 2015 after-tax earnings, excluding one-time charges related to the acquisition. The company estimates the accretion to reach about $470 million for 2017.

The combined company will be led by Springleaf CEO Jay Levine, while Mary McDowell will continue as CEO of OneMain.

Initially, the combined company will maintain both the Springleaf and OneMain brands, but expects to migrate to the OneMain brand beginning in mid-2016.

After closing, the combined company will be run from Springleaf's executive office in Connecticut, and will maintain significant presences in Evansville, Indiana and Baltimore, Maryland.

Springleaf noted that while the branch networks of the two companies are highly complementary, it expects to consolidate about 200 branches beginning in mid-2016. The company said that detailed planning for the integration of the two companies will begin immediately upon closing, with actual integration of systems and facilities expected to commence in mid-2016.

C closed Monday's trading at $53.49. In Tuesday's pre-market trades, the stock is up $0.51 or 0.95 percent to $54.00.

LEAF closed Monday's trading at $38.04, down $0.41 or 1.07 percent on a volume of 207,852 shares.