Citi Sheds Primerica Stake

Citigroup Inc. (C - Analyst Report) is planning to shed off remaining 8.1 million shares of Primerica Inc. (PRI - Snapshot Report), an insurance company that Citi had spun off in the first half of 2010. The 8.1 million shares will go for public offering and is expected to fetch Citi proceeds of over $180.5 million based on Primerica’s closing price of $22.29 on Tuesday.

Last month, Citigroup diluted its stake in Primerica to about 12.5%. Under the transaction, Primerica repurchased 8.9 million shares at a price of $22.42 a share for a total of $200 million. Citigroup Global Markets Inc. will act as sole book-running manager for the deal.

Primerica, headquartered in Duluth, Georgia, is a leading distributor of financial products to middle income households in North America with approximately 92,000 licensed representatives. The company and its representatives offer clients term life insurance, mutual funds, variable annuities and other financial products.

We believe that this planned sale out of Primerica’s common stock is a strategic fit for Citi as it would reduce non-core assets of the company. The company is expected to use proceeds for general corporate purposes and hedging.

Citigroup has been severely hurt by billions in losses and write-downs of problem loans and toxic assets. The company had to ultimately resort to a bailout. It received $45 billion bailout during that period and went for a restructuring plan across its business. Moreover, the bailout money was repaid by December 2009.

It has termed CitiCorp as its core operating unit and Citi Holdings as its non-core unit, intending to dispose (through sale and divestitures) its non-core operations. Primerica happened to be a part of this non-core unit.

Citi currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.