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Citigroup Merger

Abstract: In 1998, the Multinational Bank Citicorp and the Insurance & Credit Service Provider Travelers Group signed a merger deal and formed Citigroup.

This Citigroup Merger was expected to generate a market capitalization, which would be enough to give the merged company the first position among the financial services companies of the world. Merger between Citicorp and Travelers Group Citigroup Merger refers to the merger between Citicorp and Travelers Group, which created one of the world's largest financial services company, the Citigroup. This $140 billion dollar merger took place in the year 1998. The merger deal was done with the objective of making this American joint financial corporation, the largest in the world, ahead of the Deutsche Bank of Germany and UBS of Switzerland. Position of Citicorp The two financial services company which formed Citigroup were very large institutions themselves. Citicorp was the multinational bank which used to serve customers in more than 100 countries of the world. Citicorp was established as City Bank of New York long back in 1812.
In 1865, the Bank joined National Banking System of US and became National City Bank of New York. In 1895, it established itself as the largest American Bank. In 1926, it attained the position of largest commercial bank in the world. But, it got the name Citicorp in the middle of 1970s. Position of Travelers Group Just like Citicorp, Travelers Group was also a big financial institution involved in providing Brokerage Service, Insurance Service, Credit Service and other Consumer Finance Services. Before merging with Citicorp, Travelers Group itself went through many mergers and acquisitions. Among them acquisition of the asset management and retail brokerage firm named Shearson Lehman and acquisition of the Investment Bank, Salomon Brothers are quite significant. Expectations from the Merger When these two biggies, Citicorp and Travelers Group merged in 1998, expectations rose to high levels. It was estimated that the Citigroup would serve almost 100 million customers in more than 100 countries of the world. It was expected that market capitalization of the merged company would give it the first rank among all the financial services company of the world. The Citigroup Merger Process In the merger deal it was decided that the shareholders of the two companies would possess 50% of the merged company. The shareholders of Citicorp were asked to convert their each share to 2.5 shares of the Citigroup. This share exchange procedure was given tax exemption. But, in case of Preferred Stock of Citicorp it was decided that these would automatically turn into preferred stock of the new company Citigroup. Shareholders of Travelers Group were instructed to retain their shares as those would be converted into the shares of Citigroup, the terms and conditions remaining the same.

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Last Updated on : 29th July 2013

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