Word is out today that Goldman Sachs (GS) approached Citigroup (C) last month to proposed a merger .
Citigroup CEO Vikram Pandit rejected the idea from Goldman Sachs CEO Lloyd Blankfein, the FT said, citing people it didn’t identify.
The deal, which was to have been structured as a takeover of Goldman by Citigroup, would have led to the firing of thousands of workers in the investment banking units of the two companies, and the loss of several senior executives, the newspaper said
However, uniting Goldman’s strengths in risk management, advisory services and proprietary trading with Citi’s large retail deposit base and huge corporate client network could have created a powerful financial giant.
Industry insiders argue that such a deal could have also benefited the US financial system by creating a counterpoint to JPMorgan Chase and Bank of America, two institutions that have significantly expanded during the recent raft of government-induced rescue deals.
The tone of the article was that Citi rejected the proposal out of hand. Now, this is odd for a couple reasons. First we know Citi has the largest exposure to the current mortgage market problem. Second, they can’t be in that strong of a financial position as their proposed takeover of Wachovia (WB) was not able to be accomplished without FDIC assistance. Wells Fargo (WFC), on the other hand, walked in and did the deal on its own.
So, one has to wonder why it was not even considered? Perhaps the “culture” differences are just so great, consolidating them would have been too difficult. But, if Goldman thought it was doable, why not even consider it?
This raises even more questions about Citi. Goldman is known as the class of the industry and if Citi won’t even consider a tie-up with them, then what is it about Citi that makes it so prohibitive? Is it a fear of Goldman merging and then taking over? If that is the case then wouldn’t that be the best for Citi shareholders in the long run? Isn’t that what Pandit & Co. are really there for?
It isn’t the fact that Citi turned the overture down that ought to concern people, it is the “without consideration” of the action that ought to.
Disclosure (“none” means no position):Long GS,C
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3 replies on “CitiSachs?”
how about: what does it say about Goldman that Citi rejects them out of hand?
I take with a grain of salt any comment that a merger offer was dismissed without consideration, any merger not just this one. If we assume Pandit said no right off the bat, you have to assume he had 20 I-bankers crunching numbers before the phone hit the receiver. If it was offered, it is being considered.
I’ve spoken to people at Citi…
there is no interest…post coming..