Citigroup will sell OneMain Financial Holdings Inc. to Springleaf Holdings Inc for $42.5 billion in cash, according to Reuters. The deal would make Springleaf the largest subprime lender in the U.S, with $15 billion in assets and nearly 2,000 branches.
Citigroup has been trying to sell OneMain since 2011 as a plan the bank has implemented to sell unwanted assets and focus on wealthier clients. OneMain is a part of Citi Holdings, which was created during the financial crisis to place assets that Citigroup wanted to divest or wind down. It provides loans to buy small-ticket items and meet unexpected expenses. The company posted a loss of $2 billion in 2010, but has since been profitable, with profits rising 7 percent to $415 million in nine months. OneMain has 1,140 branches in the U.S.
According to the article, OneMain had filed to go public in October, but Citigroup had always preferred an outright sale. However, potential buyers had trouble raising funds and Citi was unwilling to sell at prices being offered. Industry experts thought OneMain would sell for more money. Jefferies & Co said it expected OneMain to sell for $5 million.
Citigroup said it will use a part of the sale proceeds to retire certain funding that supports Citi Holdings. The combination of the debt retirement and the remaining proceeds is expected to add about $1 billion to Citi's earnings before income taxes. Citi Holdings’ assets had been reduced to 5 percent of total assets in 2014 from a peak of more than 30 percent, by Citi.
Springfield shares rose 38 percent to a record $52.44 on Tuesday, while Citigroup's shares were slightly higher at $53.73. Springleaf CEO Jay Levine said the combined company is expected to earn $800 to $900 million in 2017, according to Reuters.