Being 34% owned by the U.S. government, Citigroup's (NYSE: C) destiny is somewhat murky. Yet, to pay off the loans, this massive financial institution must shrink. To this end, Citigroup has filed a public offering for its Primerica Financial Services. According to the prospectus, the deal is expected to raise $100 million, but it's likely the amount will be much larger.Primerica certainly has an interesting history. Back in 1977, an aggressive financial service executive, Arthur Williams, started the company, with the focus on providing term insurance to consumers as well as mutual fund products. However, he had an interesting twist on distribution: he used network marketing. Basically, a Primerica agent would get incentives by recruiting new agents. As a result, the company's growth exploded.
This caught the interest of Sandy Weill, who had ambitions of building an empire of his own. So, in the late 1980s, he purchased Primerica, which ultimately became the foundation for Citigroup.
In fact, despite all the upheaval in the markets, Primerica continues to be a solid company. In all, there are about 100,000 sales agents.
What's more, for the first half of this year, revenues came to $1.09 billion, with net income of $244.7 million. Keep in mind that -- because of reinsurance arrangements -- Citigroup will continue to reap cash flows from Primerica even after the public offering.
And of course, the lead underwriter on the IPO is Citigroup.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
11-06-2009 @ 12:10PM
al said...
you forget to point out that C, post divestiture will still be be on the hook for a large portion of the insurance liability.
the brains at C abound. a riddle-- when does a company divest itself from a business but still have ongoing risk?
at C, that's where !!!!!