US government to hike Citi stake; Pandit likely to stay as CEO: reports

27 February 2009

Citigroup has reached an agreement with the US government on increasing its stake in the beleaguered US banking giant and a recast of its 15-member board of directors, US media reports said.

Vikram Pandit, Citi's India-born CEO,however, is likely to remain at the helm despite the government increasing its stake and a board shake-up, reports said.

The treasury department has agreed to convert some of its current holdings of Citigroup shares – in the 45-billion-dollar lifeline extended to the bank - into common stock. An announcement to this effect is expected later today, The Wall Street Journal said in its online edition.

"Uncle Sam's plan to increase its stake in hobbled Citigroup could be rolled out as soon as today - but what's not likely to roll as part of the deal is CEO Vikram Pandit's head," according to a report in the online edition of the the New York Post.
 
The treasury has agreed to convert up to $25 billion of its current holding to common stock, the report cited people familiar with the matter as saying. However, actual stake hike will depend on the amount of preferred shares that private investors are willing to convert into common stock, the report said.

The conversion price is likely to be fixed at $5 a share against Thursday's closing price of Citi shares of $2.46.

Industry analysts said the final government holding in Citigroup will rise from the current 8 per cent to 30-40 per cent post conversion.