By Svea Herbst-Bayliss and David Henry
NEW YORK (More Bank) – Citigroup Inc. (CN) will give ValueAct Capital better access to its books and board of directors, saying the bank and activist hedge fund are deepening their relationship about a year after ValueAct's first investment in Citi.
The two men said Friday that they have signed an "information sharing and engagement agreement," which will enable "deeper engagement and closer cooperation."
The San Francisco-based hedge fund, one of the industry's most-watched investors, unveiled a $ 1.2 billion stake in Citi, a New York-based company, last May, and said it appreciated the Low risk level and reliable bank income.
ValueAct has strengthened its position in recent months and currently holds approximately 32 million Citigroup shares, representing 1.3% of the outstanding shares, according to documents filed by the company.
The fund is one of the largest shareholders of Citigroup, the third largest US bank in terms of assets.
ValueAct, who stands out from many other volunteer activists, did not ask for a seat on the board of directors at the time of his investment and said Friday that he was not looking for one. The agreement, which essentially offers the rights of hedge funds associated with a seat on the board of directors, is a first for ValueAct, a company known for working collaboratively and behind the scenes with target companies.
But when the time comes and some potential conflicts are eliminated, ValueAct should propose a candidate to the board of directors, the statement said. ValueAct currently sits on the Board of Directors of Alliance Data Systems Corp. (ADS.N), which competes with Citigroup for the issuance of credit cards for retailers.
ValueAct typically holds core investments such as Citigroup for three to five years, said a person familiar with the fund.
ValueAct and Citigroup on Friday declined to comment beyond the publication.
By signing this agreement, the hedge fund announces its intention to involve more in this bank than with Morgan Stanley (MS.N), another name for its portfolio. ValueAct has approximately 35% of its portfolio invested in financial services companies.
Susan Roth Katzke, an analyst at Credit Suisse, said the deal was positive for Citi, saying the company was facing an "extreme effort" to reach its tangible target of 13% common shares in the company. Horizon 2020.
Citigroup has made a number of changes since ValueAct commented on its participation in May in a letter to its investors. He separated from the head of his troubled credit card division, announced the reorganization of part of his investment bank and appointed a new president and a new chief financial officer to replace those who were retiring.
Its shares lagged other major banks because of doubts about its ability to increase revenues as a result of extensive restructuring after the financial crisis.
Citigroup, which will release its fourth quarter results Monday, was trading at $ 57.06 on Friday, up about 1% and outperforming the sector.
(Report by Svea Herbst-Bayliss and David Henry in New York, edited by Jonathan Oatis and Rosalba O & # 39; Brien)