Citi to Buy BISYS and Spin Off Retirement Services Unit

BISYS announced Wednesday that it has agreed to be acquired by Citigroup Inc. for $1.45 billion in a deal that will also see BISYS’ retirement services unit sold to a private equity firm.
Private equity firm JC Flowers will acquire BISYS’ Retirement Services and Insurance Services Group from Citigroup, according to an announcement. Under the $1.45 billion-deal BISYS shareholders will get a total of $12 per share – $11.85 paid by Citigroup and $0.15 paid by BISYS when the deal closes, which is expected to be in the second half of 2007. The total purchase price will be $1.47 billion.
Under the deal, Citigroup would combine BISYS Fund Services and Alternative Investment Services, which provide administration and distribution services for mutual funds, hedge funds, private equity funds, and other investment products, with its own operations.
“JC Flowers’ acquisition of BISYS’ life insurance and retirement services business has the potential for creating a leading integrated provider of wholesale insurance brokerage and retirement services solutions,” the announcement asserted. Flowers will combine its existing commercial insurance business, Crump, with BISYS’ Commercial Insurance Services. Several weeks ago, JC Flowers became part of a buyout group to acquire education lender Sallie Mae as part of a $25 billion-deal. Observers asserted Wednesday that Flowers’ involvement in the Citi/BISYS deal was a testament to the strategic importance of the retirement services space.
Citigroup said in a separate announcement that its net cost after the Flowers transaction is expected to be about $800 million.
“BISYS and Citi are a great fit,” declared Michael Klein, Co-President of Citi Markets & Banking, in the Citigroup statement. “BISYS Investment Services division propels Citi into a market leading position in hedge fund administration and mutual fund servicing, and integrating it into Citi’s global network will extend our full service client platform and reaffirm our focus on serving the needs of high growth markets including private equity and hedge funds.”

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