Lexington Partners to Acquire Citi’s Interest in Fund of Funds and Co-Investment Businesses
13 Jul 2010
– Citi to Divest Private Equity Fund of Funds and Co-Investments Businesses –
– StepStone Group and Lexington Partners to Manage Businesses –
New York – July 13, 2010
Citi today announced it has entered into a definitive agreement to transfer the management and certain proprietary interests in its fund of funds, mezzanine funds, feeder funds and co-investment businesses (the CPE businesses) to StepStone Group LLC and Lexington Partners.
As part of the agreement, StepStone, a provider of customized private equity investment management and advisory services, will provide ongoing management and advisory services for the CPE businesses’ $4 billion fund of funds, feeder and co-investment funds. Lexington, a leading global private equity sponsor, will acquire a portion of Citi’s proprietary capital investments in the various funds and provide oversight for the co-investment portion of the CPE businesses. Terms of the transaction, which is expected to close early in the fourth quarter of 2010, were not disclosed. Completion of the transaction is subject to customary closing conditions.
The CPE businesses, which include investments in private equity funds, co-investments in buyouts and mezzanine investments in middle market companies, are managed by professionals who have invested approximately $2 billion on behalf of Citi’s proprietary accounts and approximately $8 billion for third-party clients. A significant number of CPE professionals are expected to join StepStone and Lexington and some will remain at Citi.
This transaction is part of Citi’s strategy to reduce the assets and businesses within Citi Holdings, its portfolio of non-core operating businesses and assets, in an economically rational manner while working to generate long-term profitability and growth from the core businesses within Citicorp. Citi will continue to pursue opportunities to divest non-core assets in a manner that optimizes the value of those assets for shareholders. Upon completion, this transaction will reduce GAAP assets in Citi Holdings by approximately $1.1 billion.
Citi will retain its management of, and certain proprietary interests in, its employee funds. This transaction does not impact Citi Capital Advisors, which is part of Citicorp, Citi’s core business segment.
“Citi has an established and successful relationship with StepStone, and Lexington is a highly regarded co-investment manager in the industry. We believe the combination of StepStone, Lexington and the CPE team are well qualified to manage these assets,” said Mark Mason, Chief Operating Officer of the Citi Holdings segment at Citi.
“The agreement to manage the CPE businesses is a significant expansion of StepStone’s private equity investment management activities and capabilities,” said Monte Brem, Chief Executive Officer of StepStone. “The CPE businesses are an ideal fit with our fiduciary management and back-office services, adding highly experienced and effective monitoring, reporting and investment teams to our StepStone professionals. In addition, it has been our stated intention to expand and balance our U.S. presence on the East and West coasts, and this transaction moves that effort forward.”
Brent Nicklas, Managing Partner of Lexington, added, “Lexington is pleased to have reached agreement with Citi to acquire a significant portfolio of high quality, private equity assets. We are also pleased to work with CPE and StepStone as well as a variety of leading global private equity sponsors to maximize the values of these assets for all stakeholders.”
About Citi
Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 140 countries. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com.
About StepStone Group
StepStone Group LLC is an independent firm focused exclusively on providing private equity asset management and advisory services. The firm oversees more than $15 billion of private equity allocations and has offices in San Diego, New York and Beijing. StepStone provides investment services to institutional investors focused on achieving superior risk-adjusted private equity returns. StepStone has a proprietary research based approach to optimizing exposure to top performing investment strategies, geographies and managers. Additional information may be found at www.stepstonegroup.com.
