Cal Fed shareholders want Citibank stock

Thursday, Aug. 22, 2002 | 11:08 a.m.

SUN STAFF AND WIRE REPORTS

SAN FRANCISCO -- Golden State Bancorp stockholders today approved Citigroup Inc.'s planned $4.7 billion takeover of the second-largest U.S. thrift, aimed at almost doubling the New York-based bank's U.S. branches.

The San Francisco-based company's shareholders voted 88 percent in favor of the purchase. Golden State didn't disclose the number of shareholders who opposed the plan or didn't vote.

The decision is vote of confidence in Citigroup after its shares in the world's largest financial services company dropped 20 percent since the transaction was announced on May 21. The share drop has shrunk the offer from its initial value of $5.8 billion.

The two banks expect to complete the purchase before Sept. 30, pending regulatory approval.

Golden State stockholders, in a vote Wednesday, generally preferred receiving Citigroup stock to all cash for their shares in the pending $4.7 billion takeover.

The merger of Golden State, owner of California Federal Bank, and Citigroup, owner of Citibank, would create the third-largest bank in Nevada behind Wells Fargo and Bank of America. Cal Fed has nine Las Vegas-area branches while Citibank has five.

Investors holding 64.2 percent of Golden State chose Wednesday to receive 0.8210 of a share of Citigroup common stock and $7.47 in cash for each of their shares, the companies said today. At Citigroup's closing price Wednesday, each Golden State share would be worth $35.67.

A smaller group of 7.6 percent of Golden State shareholders chose to receive cash only, and 28.2 percent did not make a valid selection. Those two groups will receive about $35.68 in cash, the companies said.

The vote of confidence in Citigroup shares comes as the bank company's market value has slid 20 percent since the deal was announced on May 21, shrinking the offer from its initial value of $40.10 a share.

Financier Ronald Perelman, a Golden State board member and its largest single stockholder with 42.9 million shares, announced Monday that he would choose the stock-and-cash option.

Perelman will emerge as one of the largest shareholders of Citigroup.

By acquiring the second largest U.S. thrift company, Citigroup will double its number of U.S. branches and boost its domestic market share of customers to 4.2 percent from 3.5 percent. Citigroup currently has 237 branches in New York, New Jersey and Connecticut, 82 in California and Nevada, 70 in Illinois and 35 in Florida.

Golden State has $25 billion in deposits, which will give New York City-based Citigroup a 5.8 percent share of California's $492 billion of deposits. Citigroup currently has 1.3 percent of deposits in the state.

The two banks expect to complete the purchase, which was valued at $5.8 billion when announced on May 21, before Sept. 30.

Separately, Sallie Mae, the government-sponsored company that offers student loans, said it's not interested in buying Golden State.

The company made an informal all-stock proposal to buy Golden State earlier this year that now would be worth more than Citigroup's offer, which had an initial value of $5.8 billion, the Wall Street Journal reported.

Bloomberg News contributed to this report.