Citigroup To Buy Washington Mutual For $1.25B

NEW YORK -- Citigroup Inc. (C) agreed to acquire Washington Mutual Inc.'s (WM) Washington Mutual Finance unit for $1.25 billion.

The company said in a statement Monday that acquiring the finance business, which had assets of $4.1 billion as of Sept. 30, will add to profits in 2004.

The deal is already reflected in Washington Mutual's 2004 forecast, the company said in a separate statement.

The companies expect the deal will close in the first quarter, following customary regulatory approvals.

In after-hours trading, shares of Washington Mutual recently changed hands at $47.45, up 2% from the regular-session close of $46.55. The shares rose 39 cents, or 0.8%, on the day.

Citigroup said acquiring Washington Mutual Finance, which is based in Tampa, Fla., accelerates growth of its CitiFinancial franchise. The business provides direct consumer installment loans and real estate secured loans and sells insurance.

The deal, which allows Citigroup to enter about 65 new markets, includes 409 Washington Mutual Finance offices in 25 states, primarily in the southeastern and southwestern U.S. The business has more than 2,300 employees.

CitiFinancial, which has nearly 1,600 offices in 48 states, said the move follows its previously announced strategy of expanding its consumer-finance business through acquisitions aimed at key regions.

Washington Mutual said the sale follows the realignment of its businesses around its two primary customer segments: middle-market consumers and commercial clients.

Washington Mutual, the nation's largest thrift, said it plans to use the cash to fund retail store growth, asset generation and other initiatives in 2004. In connection with the deal, Washington Mutual Finance's public debt will remain outstanding.

Washington Mutual Finance's focus on mostly smaller-market geographic markets isn't in line with the parent company's focus on larger urban and suburban markets, the company noted.

Washington Mutual acquired the consumer finance unit, then known as Aristar Inc., in 1997 as part of its acquisition of Great Western Financial Corp.

Net receivables at Washington Mutual Finance stood at $3.8 billion as of Sept. 30.

Lehman Brothers served as Washington Mutual's financial adviser.

Company Web sites: http://www.citigroup.com; http://www.wamu.com

-Tim Paradis; Dow Jones Newswires; 201-938-5400

Updated November 24, 2003 7:17 p.m.