Citigroup has sold a $1.7bn private equity portfolio to France’s Axa Private Equity, highlighting the disposal of alternative investments and other less liquid assets from banks as they cope with tighter capital requirements.
The US bank has agreed to sell 18 direct stakes in companies and a package of 207 investments in buy-out funds from groups such as Blackstone, Carlyle, KKR, the private equity unit of the French insurer Axa said on Wednesday.
The assets were part of Citi Holdings, a portfolio of businesses, loans and investments the bank opted to sell in the wake of its government bail-out from the financial crisis.
The unit’s assets fell by a third, to $337bn, at the end of the first quarter from a year earlier as Citi sold some securities, loans and divisions and ran off others. Holdings now accounts for 17 per cent of the bank’s total assets, the company said in April.
“This sale marks the completion of a significant share of Citi Holdings’ proprietary private equity investments and demonstrates the progress the Citi Holdings team is making in reducing non-core assets on our balance sheet,” said Mark Mason, chief operating officer of Citi Holdings.
The disposal is one of the largest ever transactions in the secondary market for relatively illiquid private equity assets. Buy-out funds usually lock in their fund investors for about 10 years.
Banks have fed the market with a number of large portfolios in the past year, when Axa Private Equity bought a $1.9bn holding from Bank of America and another $670m portfolio from French investment bank Natixis. In the UK, Lloyds Bank sold a majority stake in a portfolio to Coller Capital in a £332m deal.
Dominique Senequier, Axa Private Equity’s chief executive, said she expected a further series of deals in the next few years as market valuations for such assets, which fell to dramatically low levels during the financial crisis, had recovered to book values.
She said Axa would spend at least $2bn this year on such transactions including the Citigroup deal, whose price remained undisclosed.
“We are working on other big deals in Europe at the moment and we hope to close them this year,” Ms Senequier told the Financial Times.
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