Citigroup, Inc (NYSE: C) has agreed to sell its student loan business to Discover Financial Services (NYSE: DFS) for $600 million.
Stamford, CT-based Student Loan Corp. said in a statement on Friday that it would be purchased by Discover for $30.00 per share, or about 40% higher than the closing price on Thursday in the New York Stock Exchange. Separately, Sallie Mae (SLM Corp) will purchase $28 billion of federal student loans and related assets from Student Loan Corp.
“The private student loan business is an important part of Discover’s direct banking strategy, and this acquisition will enhance our competitive position in private student loan originations,” said David Nelms, CEO of Discover in a statement. “The transaction is expected to be immediately profitable for our shareholders.”
Citigroup will acquire approximately $8.7 billion in student loans (both federal and private) from Student Loan Corp, which is 20% publicly held and 80% owned by Citigroup.
Sallie Mae Spokeswoman Martha Holler said in a statement that “For Sallie Mae this is about serving 1.3 million new customers as they repay their $27 billion of loans.” She added, “we pursued what made sense for us in terms of new customers, asset quality and potential return.”
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 flat at $3.97 on Friday.
