Citigroup, Inc (NYSE: C) Sued over Sale of Student Loan Business
Citigroup, Inc (NYSE: C)’s announcement that it would sell its student loan business to SLM Corp and Discover Financial Services (NYSE: DFS) has led to a lawsuit from an investor that thinks shareholders have not gotten fair market value for the company’s student loan business in the deal.
Shareholder Alan Kahn filed a suit in Delaware Chancery Court in Wilmington, DE that the deal was “underpriced.” His complaint says that the company’s board is violating its duties to get the best price for the business and wants an injunction to stop the acquisition. He is also seeking class-action status on the suit.
Citigroup, Inc (NYSE: C) said in a statement that “We believe this lawsuit is without merit, and we intend to vigorously defend our position.”
Three other law firms said that they are investigating claims against Student Loan Corp’s board of directors relating to the acquisition.
Dallas-based Briscoe Law Firm and Powers Taylor said that the lender’s book value could be as much as $65.00 per share in a press release, but the deal from Discover to purchase Student Loan Corp was valued at $30.00 per share, a 42% premium over the current stock price.
“Based on historical share values and other aspects of the proposed agreement, the investigation concerns whether the proposed share price is fair to Student Loan/STU shareholders,” the joint release said. “In addition, the investigation relates to possible breaches of fiduciary duty and other violations of state law by the Board of Directors of STU for approving this transaction and whether STU’s Board of Directors acted in the shareholders’ best interests.”
Citigroup Inc. (Citigroup) is a global diversified financial services holding company. The Company provides consumers, corporations, governments and institutions with a range of financial products and services. As of December 31, 2009, Citigroup had approximately 200 million customer accounts and did business in more than 140 countries. Citigroup operates through two primary business segments: Citicorp, consisting of its Regional Consumer Banking (RCB) businesses and Institutional Clients Group (ICG), and Citi Holdings, consisting of its Brokerage and Asset Management (BAM), Local Consumer Lending (LCL), and Special Asset Pool (SAP). In April 2010, Barclays PLC acquired Italian credit card business of Citibank International Bank plc. In May 2010, the Company announced the creation of a new Collateral Management Services unit within its Securities and Fund Services business.
Shares of Citigroup, Inc (NYSE: C) traded down 1.25% during mid-day trading on Tuesday.