Citigroup Inc. said on Wednesday it agreed to buy financial services provider Bisys Group Inc. (BSG) for $1.45 billion to offer more services to hedge funds and private equity firms.
The largest U.S. bank would keep Roseland, New Jersey-based Bisys' fund services and alternative investment services units. It will fold them into its global transaction services unit, which holds securities, processes stock and bond trades, and offers cash management services.
Citigroup plans to sell Bisys' retirement and insurance services units to private equity firm J.C. Flowers & Co. for about $645 million. Its net cost would thus be $800 million.
Bisys shareholders would receive $11.85 per share in cash, 3.3 percent more than Tuesday's closing price. They would also receive a 15 cent per share dividend payable by Bisys, netting an additional $18 million.
"Hedge funds, alternative investments and private equity is one of the fastest-growing segments in the managed money industry," said Neeraj Sahai, Citigroup's global head of securities and fund services, in an interview.
The transaction would end Bisys' nearly nine-month review of strategic alternatives. Bisys employs about 5,000 people, divided roughly equally among units going to Citigroup and units going to Flowers, spokeswoman Amy Conti said.
J.C. Flowers specializes in financial services. It was founded by former Goldman Sachs & Co. partner J. Christopher Flowers. Last month, it helped lead a planned $25 billion privatization of SLM Corp. (SLM), the student loan provider better known as Sallie Mae.