Associates First Capital
The deal, announced Wednesday, will accelerate Citigroup's global expansion in lending to consumers, giving it control of the largest publicly traded finance company in the United States and the fifth-largest consumer finance company in Japan.
As the owner of Citibank, Citigroup is already the biggest bank-holding company in the United States and is a leader in insurance and brokerage services through its Travelers and Salomon Smith Barney operations.
The deal has been unanimously approved by the boards of both companies and is expected to close by the end of the year, pending regulatory and shareholder approval.
Under terms of the deal, Associates First shareholders will get 0.7334 of a share of Citigroup stock for each of their shares. That represents $42.49 for each Associates First share based on Tuesday's closing price for Citigroup of $57.56 a share.
At that price, Citigroup is paying about a 52 percent premium over Associates First Capital's closing price of $28 on Tuesday. Both Citigroup and Associates First are traded on the New York Stock Exchange.
After completion of the deal, Associates shareholders would own about 10 percent of Citigroup shares.
Associates manages more than $100 billion in assets and has 2,750 offices in the United States and 13 other countries.
New York-based Citigroup has assets of more than $791 billion with operations in more than 100 countries.
Sanford I. Weill, chairman and chief executive of Citigroup, said the deal greatly expands its international earnings from consumer financial services.
"We are particularly excited about The Associates' strong presence in Japan, where it is the fifth-largest consumer finance company, and in Europe, where it has more than 700,000 customers," he said.
Keith W. Hughes, chairman and chief executive of Associates, will become vice chairman of Citigroup and join its board after the deal is concluded.
Following the close of the transaction, Associates' North American consumer finance operations will be combined with CitiFinancial, Citigroup's consumer finance business.
In addition, Associates' commercial unit will be combined with Citigroup's global equipment finance operations.
The statement did not say whether any jobs would be eliminated.