In a setback to Citigroup Inc.'s efforts to divest itself of noncore businesses, talks to sell the bank's OneMain consumer-lending unit to private-equity buyers have ended without a deal in place, according to people familiar with the matter.
The failure to reach a sale agreement, which could have included the involvement of Warren Buffett's Berkshire Hathaway Inc., reflects gyrations in the credit markets amid the European sovereign-debt crisis and rising fears of a global economic slowdown.
Private-equity firms Centerbridge Capital Partners LLC and Leucadia National Corp., along with Berkshire, had been in exclusive talks since the summer to purchase OneMain, which makes mortgage and other loans to high-risk borrowers. To fund the business, the would-be buyers would have had to package the loans and sell them to investors. But the market for such securitizations has seized up amid growing economic fears, complicating any deal. The sides mutually agreed to end the discussions, people familiar with the matter said.
Citigroup could still try to sell OneMain once the debt and equity markets calm down, the people said. Although they said the unit is profitable, Citigroup has decided OneMain isn't central to its core operations. The business was placed in a unit called Citi Holdings that the bank set up to house assets it intends to sell or wind down.
Citi Holdings has already reduced its assets by more than half since its creation in 2009. Despite Citigroup's desire to continue to shrink Citi Holdings, the bank has maintained that it won't sell assets at fire-sale prices. Citigroup recently decided to keep a private-label credit-card business that had been earmarked for sale. The business, recently renamed Citi Retail Services, had experienced a turnaround.
"The objective of Citi Holdings is to reduce noncore assets in an economically rational manner that is in the best interests of our stakeholders," a Citigroup spokeswoman said. She declined to comment on OneMain. Spokeswomen for Centerbridge and Leucadia declined to comment. Berkshire didn't respond to a request for comment.
Other Citi Holdings businesses that Citigroup eventually sold went through several iterations before a deal was reached. For instance, Citigroup originally tried to sell its student-loan business in one lump. But not all buyers wanted the whole package. Citigroup wound up selling the government-funded loans to Sallie Mae, while Discover Financial Services bought the origination platform and a portfolio of private loans in a multi-part deal.
Likewise, Citigroup sold its Primerica Inc. life-insurance businesses in stages over a two-year period that included an initial public offering. Another chunk was sold to private-equity firm Warburg Pincus LLC, while Citigroup divested its remaining stake via a private placement.
