IMGCAP(1)]
In the shuffle among companies deciding whether they want to exit or build up in the corporate payments card arena, BMO Financial Group has made a sizeable step forward through its deal to buy the North American Diners Club franchise from Citigroup.
Mike Kitchen, senior vice president for personal and commercial banking at BMO, says the company's strength in corporate cards historically has been in purchasing cards, which help businesses manage spending. But the Diners Club franchise will enable it to "leapfrog" ahead in its previously organic efforts to expand in the travel-and-entertainment arena, and to accelerate its expansion in the United States. "Through this acquisition and what we have today, we feel we are well-positioned to compete with the best-of-the-best," says Kitchen. The Toronto-based banking company says the acquisition from Citigroup Inc., which includes almost $1 billion of receivables, will more than double its corporate card business (CardLine Bulletin, 11/24). BMO says it agreed to pay about $1 billion cash, or roughly par for the receivables it will acquire. While the strategy behind the deal was driven by the franchise's corporate business, the company plans to develop the personal card business, which caters to the high-end consumer niche, and "hasn't been actively grown for quite some time," Kitchen adds. Timothy Kolk, a consultant with experience brokering portfolio sales, says, "You're just seeing everybody who's in all these businesses decide, 'Is this good for me? Or am I better off doing what I'm really good at.' " For Citi, the transaction is the latest in a string of divestitures – including a number of sales in the cards space – that the company has undertaken to rid itself of hundreds of billions of dollars of unwanted assets. The Diners Club franchise is housed in Citi Holdings, the repository Citi created for such businesses, including its retail partners credit card business, which had approximately $58 billion of receivables as of Sept. 30.
