Dubai: The Abu Dhabi Investment Authority yesterday became the biggest shareholder in the Citigroup following an acquisition of 4.9 per cent shares worth $7.5 billion in America's largest bank.
Through this deal Abu Dhabi displaces Saudi Prince Alwaleed Bin Talal as Citi's largest shareholder. Prince Alwaleed acquired his Citi stake in 1991 when the bank struggled with Latin American loan. Currently, Alwaleed holds 3.97 per cent stakes worth an estimated $6 billion.
The fresh capital injection by Adia will shore up Citi's balance sheet, which has been hurt by some $6.8 billion of writedowns and losses in the third quarter, and the potential for another $11 billion in the fourth quarter.
Following the deal Citigroup shares gained 1.3 per cent to reach $30.18 by noon yesterday. On Monday, Citi shares closed at $29.80 on the New York Stock Exchange. Citi's market value has fallen by more than $100 billion this year. "We see in Citi a highly respected company with a premier brand and with tremendous opportunities for growth," said Shaikh Ahmad Bin Zayed Al Nahyan, Managing Director of ADIA.
Analysts said yesterday that the share sale might also signal an end to the freefall in US financial stocks following this summer's credit crisis.
"There will be more such investments," said Giyas Gokkent, head of research at the National Bank of Abu Dhabi. "The other [Gulf] buyers will likely play the same white-knight role," he said.
The Abu Dhabi Investment Authority is buying equity units, which will be convertible into Citi shares at a price of up to $37.24 a share between March 15, 2010 and September 15, 2011.