UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported):  January 13, 2009
 
Citigroup Inc.
(Exact Name of Registrant as Specified in Charter)
 
     
 
Delaware
1-9924
52-1568099
(State or Other Jurisdiction
 of Incorporation)
(Commission
File Number)
(IRS Employer
 Identification No.)
 
399 Park Avenue
New York, New York 10043
(Address of Principal Executive Offices)
 
Registrant’s telephone number, including area code:  (212) 559-1000
 
N/A
(Former Name or Former Address, if Changed Since Last Report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 
Item 7.01.    Regulation FD Disclosure.

 
On January 13, 2009, Citigroup Inc. (“Citi) and Morgan Stanley issued a joint press release announcing that they have reached a definitive agreement to combine Citis Smith Barney business in the U.S., Quilter in the U.K., and Smith Barney Australia with Morgan Stanleys Global Wealth Management Group into a new joint venture to be called Morgan Stanley Smith Barney.  A copy of the press release is furnished as Exhibit 99.1 hereto.  Also on January 13, 2009, representatives of Citi and Morgan Stanley made a presentation to investors regarding the transaction.  A copy of this presentation is furnished as Exhibit 99.2 hereto.
 
The information in this Item 7.01 and Exhibits 99.1 and 99.2 of Item 9.01 is being furnished, not filed. Accordingly, the information in this Item 7.01 and Exhibits 99.1 and 99.2 of Item 9.01 will not be incorporated by reference into any registration statement filed by Citi under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1
Joint Press Release of Citigroup Inc. and Morgan Stanley dated January 13, 2009.
   
99.2
Investor Presentation dated January 13, 2009.
 
 
 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Dated:
January 14, 2009
 
CITIGROUP INC.
 
             
             
             
     
By:
/s/ michael s. helfer
 
       
Name:
Michael S. Helfer
 
       
Title:
General Counsel and Corporate Secretary
 
 
 

 
 
INDEX TO EXHIBITS


Exhibit Number
 
Description
99.1
 
Joint Press Release of Citigroup Inc. and Morgan Stanley dated January 13, 2009.
     
99.2
 
Investor Presentation dated January 13, 2009.



Exhibit 99.1
 
 
For Immediate Release

MORGAN STANLEY AND CITI TO FORM INDUSTRY-LEADING WEALTH MANAGEMENT BUSINESS THROUGH JOINT VENTURE

Combined Firm, to be Called Morgan Stanley Smith Barney, Will Have More Than 20,000 Financial Advisors and $1.7 Trillion in Client Assets

New Industry Leader Will Offer Clients and Financial Advisors
 an Unmatched Global Platform

Transaction Will Create Significant Value For Both Morgan Stanley and Citi - With $1.1 Billion in Estimated Cost Savings


New York, January 13, 2009 – Morgan Stanley (NYSE: MS) and Citi (NYSE: C) today announced  they have reached a definitive agreement to combine Morgan Stanley’s Global Wealth Management Group and Citi’s Smith Barney, Quilter in the UK, and Smith Barney Australia into a new joint venture to be called Morgan Stanley Smith Barney.  This joint venture will be the industry’s leading wealth management business.  It will not include Citi Private Bank or Nikko Cordial Securities.

The joint venture combines businesses that have1:

·
More than 20,000 high-quality financial advisors;
·
$1.7 trillion in client assets;
·
$14.9 billion in pro-forma combined revenues;
·
$2.8 billion in pro-forma combined pre-tax profit;
·
6.8 million client households globally – with a strong presence in the critically important high-net-worth client segment; and,
·
A footprint of more than 1,000 offices around the globe.

Under the terms of the agreement, Citi will exchange 100 percent of its Smith Barney, Smith Barney Australia and Quilter units for a 49 percent stake in the joint venture and an upfront cash payment of $2.7 billion.  Morgan Stanley will exchange 100 percent of its Global Wealth Management business for a 51 percent stake in the joint venture.  After year three, Morgan Stanley and Citi will have various purchase and sale rights for the joint venture, but Citi will continue to own a significant stake in the joint venture at least through year five.
 
 

1  Morgan Stanley revenues and pre-tax income for FY08.  Citi revenues and pre-tax income estimated LTM 3Q08.  Client assets for Morgan Stanley and Citi as of 3Q08 for comparability purposes; Morgan Stanley 4Q08 assets were $546 billion.  Clients as of 12/08.  Financial advisors current.


 
Morgan Stanley and Citi each will distribute their products through what will be the leading global wealth management platform.  Each organization will retain its deposits as of the close of the transaction. New deposits collected in the joint venture will be allocated based on ownership of the new company.

The transaction, which has been approved by the Boards of Directors of both companies, is expected to close in the third quarter, subject to regulatory approvals and other customary closing conditions.

John Mack, Chairman and CEO of Morgan Stanley, said, “By bringing together Morgan Stanley’s and Citi’s strong wealth management businesses, we are creating a new industry-leading wealth management franchise.  Morgan Stanley Smith Barney will become the first choice for clients and high-quality financial advisors by offering an even broader range of financial products and services, as well as the best market intelligence and investment opportunities from both Morgan Stanley’s and Citi's global networks.  This joint venture is an important step forward in our effort to build our wealth management franchise, which we believe will be an increasingly important and profitable part of Morgan Stanley’s business in the years ahead.”

Citi will benefit from this transaction by monetizing its investment in its wealth management business, while continuing to benefit from a multi-year earnings stream as it simplifies and streamlines its organizational structure.  The joint venture expands Citi's access to retail customers for our capital markets products and research, allowing us to better serve our issuing clients.  In addition, Citi will continue to capture our current levels of order flow for our investing clients. At closing, Citi will recognize a pre-tax gain of approximately $9.5 billion, or approximately $5.8 billion on an after-tax basis, and will create approximately $6.5 billion of tangible common equity.

Citi CEO Vikram Pandit said, “This joint venture creates a peerless global wealth management business and provides tremendous value for Citi.  Once this transaction is completed, our clients and Financial Advisors will benefit from the combined intellectual capital, market intelligence and product capability of Citi and Morgan Stanley.  For Citi, the joint venture provides significant synergies and scale, substantially reduces our expenses and enables us to retain a significant stake in a company that immediately becomes the industry leader with real growth opportunities.  We will own 49 percent of this leading wealth management business and will continue to participate in its earnings and growth.  In addition, we will generate equity capital that we can deploy to other core businesses which are well positioned to deliver attractive returns in the future.  Citi and its clients will maintain access to the industry’s leading wealth management platform for capital markets transactions.”

The joint venture is expected to achieve cost savings of approximately $1.1 billion – in part by rationalizing and consolidating key functions including technology, operations, sales support, product development and marketing.  These operational efficiencies represent approximately 15 percent of the combined firm’s estimated expense base, excluding financial advisors’ commission compensation.

 
2


 
Experienced Management Team Drawn From Both Companies

Morgan Stanley Smith Barney will operate as one fully integrated organization with a world-class management team drawn from both companies.

·
Morgan Stanley Co-President James Gorman, who has spearheaded a significant turnaround of the Firm’s Global Wealth Management Group and previously led Merrill Lynch’s Global Private Client Group to renewed profitability, will serve as chairman of the new company.  Mr. Gorman will continue to serve as Co-President of Morgan Stanley.
·
Charles Johnston, who has 30 years of experience in wealth management, most recently as President of Citi’s Global Wealth Management business in the U.S. and Canada, will serve as president.

Additional senior management will be drawn from the ranks of both companies.  The new venture will be governed by a newly formed Board of Directors comprised of representatives from both companies.

Will Offer Superior Platform – and Broad New Opportunities – for High-Quality Financial Advisors

This joint venture will provide a superior platform with unmatched resources, intellectual capital and research for financial advisors to grow their business.  It also will provide broad new opportunities for growth and professional development to employees across the organization, including financial advisors, branch managers, product, marketing and client service specialists, and technology and operations professionals.

Mr. Gorman said, “This transaction brings together two of the leading global brands in wealth management and some of the most talented and productive financial advisors in the industry.  I truly believe this combination will offer those financial advisors the best possible platform and resources, as well as exciting new opportunities for growth and development.  Both Morgan Stanley and Citi’s wealth management businesses have a culture that is focused on first-rate advice, superior client service and a true spirit of partnership, and we are committed to building upon those same values in the new Morgan Stanley Smith Barney.”

Will Offer Clients Unmatched Selection of Financial Products and Investment Opportunities from Both Morgan Stanley and Citi Networks
 
The scale of this venture will provide clients with access to both Morgan Stanley and Citi’s extensive global networks for the best market intelligence and investment opportunities wherever they originate around the world, while continuing to enjoy the first-rate client service that has long characterized both wealth management organizations.
 
 
3


 
Mr. Johnston said, “This new business will offer clients unrivaled wealth management services by bringing together two industry leaders and giving clients the ability to access the best of both organizations’ products, investment expertise and global reach.  At the same time, it will allow clients to continue working with the trusted financial advisors who understand their needs and their goals and remain committed to a superior level of customer service.”

Morgan Stanley was advised by its Institutional Securities Group and Wachtell Lipton Rosen & Katz.  Citi was advised by its Institutional Clients Group and Davis Polk & Wardwell.

Conference Call Information

There will be a presentation on the joint venture today at 5:00 PM (EST).  A live webcast will be available at www.citigroup.com/citi/fin/ or www.morganstanley.com.  A replay of the webcast will be available at www.citigroup.com/citi/fin/pres.htm or www.morganstanley.com.  Dial-in numbers for the conference call are as follows: (877) 700-4194 in the U.S. and Canada; (706) 679-8401 outside of the U.S.  The pass code for both numbers is 80907028.

About Citi

Citi, the leading global financial services company, has some 200 million customer accounts and does business in more than 100 countries, providing 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, and wealth management.  Citi’s major brand names include Citibank, CitiFinancial, Primerica, Smith Barney, Banamex, and Nikko.  Additional information may be found at www.citigroup.com or www.citi.com.

Smith Barney is a division of Citigroup Global Markets Inc. (Member SIPC).  It is a leading provider of comprehensive financial planning and advisory services to high net worth investors, institutions, corporations and private businesses, governments and foundations.  Smith Barney offers a full suite of investment services, including asset allocation, private investments and lending services, hedge funds, cash and portfolio management, as well as retirement, education and estate planning.

About Morgan Stanley

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services.  The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 37 countries.  For further information about Morgan Stanley, please visit www.morganstanley.com.

Morgan Stanley Global Wealth Management Group (GWMG), one of the largest businesses of its kind in the world, provides a range of wealth management products and services to individuals, businesses and institutions.  These include brokerage and investment advisory services, financial and wealth planning, credit and lending, cash management, annuities and insurance, retirement and trust.
 

 
4


Forward-Looking Statements

Statements about the expected effects, timing, benefits, financial and operating results, synergies, cost savings and completion of the joint venture and all other statements in the press release, other than historical facts, constitute forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect current estimates, projections and expectations. Any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected or anticipated. These forward-looking statements are subject to numerous risks and uncertainties. There are various important factors that could cause actual results to differ materially from those in any such forward-looking statements, many of which are beyond the control of Morgan Stanley and Citi (collectively, the “Companies”), including (1) the risks associated with business combinations, (2) the ability of the Companies to obtain necessary regulatory approvals on the proposed terms and within the expected time frame, (3) the impact of general economic and industry conditions, (4) adverse changes in the stock markets, the public debt markets and other capital markets, including changes in interest rate conditions and the impact of such conditions on the joint ventures business, (5) changes in retail investor participation in the markets, (6) capital expenditure requirements, (7) projected synergies and cost savings from the joint venture may be less than expected or may not be realized within the expected time frame, (8) the businesses of the Companies that are to be contributed to the joint venture may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, (9) operating costs, customer and employee loss and business disruption following the announcement or creation of the joint venture, including difficulties in maintaining relationships with employees and customers, (10) legislative or regulatory requirements or changes in such requirements, including changes in trade, monetary and fiscal policies and laws, may adversely affect the businesses in which the joint venture is engaged, (11) competitive pressures among financial services companies may increase significantly and have an effect on pricing, spending, third-party relationships and revenues, (12) the impact of changes in accounting standards, rules or interpretations, (13) litigation liabilities, including costs, expenses, settlements and judgments which may adversely affect the joint venture or its business and (14) the impact of political conditions, including the threat of future terrorist activity and related actions by the United States abroad. The actual results or performance and expected synergies of the joint venture could differ materially from those expressed in, or implied by, these forward-looking statements. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of each of the Companies or the joint venture. For a discussion of additional risks and uncertainties that may affect the future results of the Companies, please see each of the Companies' periodic reports filed with the Securities and Exchange Commission and available on www.sec.gov.

 
 
# # #
 
 
5

 
Contacts for Citi
 
Contacts for Morgan Stanley
       
Corporate Media Relations:
Media Relations:
Shannon Bell
212-793-6206
Jeanmarie McFadden
212-762-6901
Michael Hanretta
212-559-9466
Jim Wiggins
212-762-7064
       
Global Wealth Management Media Relations:
Investor Relations:
Alexander Samuelson  
212-783-2781
Suzanne Charnas
212-761-3043
       
Investor Relations:
   
Scott Freidenrich
212-559-2718
   
       
Fixed Income Investors:
   
Maurice Raichelson
212-559-5091
   
 
6

 
 
Exhibit 99.2


 

 
Morgan Stanley Smith Barney Global Wealth Management

Joint Venture





Presentation to Investors

January 13, 2009
 

 
 
Notice
 
 

Statements about the expected effects, timing, benefits, financial and operating results, synergies, cost savings and completion of the joint venture and all other statements in this presentation, other than historical facts, constitute forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect current estimates, projections and expectations. In making any such statements, each of Morgan Stanley and Citigroup (collectively, the "Companies") believe that its current expectations are based on reasonable assumptions. However, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected or anticipated. These forward-looking statements are subject to numerous risks and uncertainties. There are various important factors that could cause actual results to differ materially from those in any such forward-looking statements, many of which are beyond the control of the Companies, including (1) the risks associated with business combinations, (2) the ability of the Companies to obtain necessary regulatory approvals on the proposed terms and within the expected time frame, (3) the impact of general economic and industry conditions, (4) adverse changes in the stock markets, the public debt markets and other capital markets, including changes in interest rate conditions and the impact of such conditions on the joint venture’s business, (5) changes in retail investor participation in the markets, (6) capital expenditure requirements, (7) projected synergies and cost savings from the joint venture may be less than expected or may not be realized within the expected time frame, (8) the businesses of the Companies that are to be contributed to the joint venture may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, (9) operating costs, customer and employee loss and business disruption following the announcement or creation of the joint venture, including difficulties in maintaining relationships with employees and customers, (10) legislative or regulatory requirements or changes in such requirements, including changes in trade, monetary and fiscal policies and laws, may adversely affect the businesses in which the joint venture is engaged, (11) competitive pressures among financial services companies may increase significantly and have an effect on pricing, spending, third-party relationships and revenues, (12) the impact of changes in accounting standards, rules or interpretations, (13) litigation liabilities, including costs, expenses, settlements and judgments which may adversely affect the joint venture or its business and (14) the impact of political conditions, including the threat of future terrorist activity and related actions by the United States abroad. The actual results or performance and expected synergies of the joint venture could differ materially from those expressed in, or implied by, these forward-looking statements. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of each of the Companies or the joint venture. For a discussion of additional risks and uncertainties that may affect the future results of the Companies, please see each of the Companies' periodic reports filed with the Securities and Exchange Commission and available on www.sec.gov.
 
 
This slide is part of a presentation by Morgan Stanley and Citigroup and is intended to be viewed as part of that presentation. The presentation is based on information from the companies’ press release and conference call.
2
 
 

 
 
Transaction Overiew
 
 
•  
Morgan Stanley and Citi combining retail brokerage forces to create an industry-leading global wealth manager
 
  Morgan Stanley will own 51% and Citi will own 49% of the Joint Venture
 
  In addition to 49% of the Joint Venture, Citi to receive cash consideration of $2.7Bn
 
  Morgan Stanley to have majority representation on the Board of Directors of the combined entity
 
•  
Deal structure designed to give Morgan Stanley the opportunity to increase share and Citi the ability to realize the potential upside in future valuation
 
  The sale of future tranches, if any, will be transacted at fair market value
 
•  
Morgan Stanley to exchange: Core Retail, Private Wealth Management and International Private Wealth Management(1)
 
•  
Citi to exchange:  Smith Barney US(2), Quilter UK and Smith Barney Australia
 
•  
James Gorman to be Chairman and Charlie Johnston to be President of the Joint Venture
 
•  
Brand name will be Morgan Stanley Smith Barney
 
•  
Subject to customary regulatory approvals

(1)  
Including Swiss Bank
 
(2)  
Excluding branch based advisors and institutional FAs
 
 
This slide is part of a presentation by Morgan Stanley and Citigroup and is intended to be viewed as part of that presentation. The presentation is based on information from the companies’ press release and conference call.
3
 
 

 
 
Joint Venture Statistics(1)
 
 
JV creates largest global wealth management firm by financial advisors and top 3 player by client assets
 
 
 
Morgan Stanley
Citi
Combined
 
Global Wealth
Smith Barney
Pro-forma
 
Management
   
       
Net Revenues (2)
$6.4Bn
$8.5Bn
$14.9Bn
       
Pre-tax Profit (3)
$1.1Bn
$1.7Bn
$2.8Bn
       
Financial Advisors (4)
8,426
~11,960
~20,390
       
Client Assets (4)
$707Bn
$1,034Bn
$1,741Bn
       
Offices
465
541
1,006
       
Headquarters
New York
New York
New York
       
 
Source:  Morgan Stanley SEC Filings and Citigroup estimates
(1)  
Morgan Stanley figures based on FY 2008.  Citigroup figures based on estimated last twelve months 3Q08
(2)  
Morgan Stanley excludes the $748mm gain on the sale of the Spanish Wealth Management business and excludes a ($108mm) write-down on Auction Rate Securities inventory. Citigroup excludes CitiStreet gain on sale of $347mm and excludes the ($306mm) write-down related to the Auction Rate Securities settlement and is adjusted for exclusion of retail branch based advisors, institutional FAs and certain lending activities
(3)  
Morgan Stanley excludes the $698mm pre-tax profit on the sale of the Spanish Wealth Management business and excludes ($641mm) of pre-tax provisions related to Auction Rate Securities. Citigroup excludes the $334mm pre-tax profit on the sale of CitiStreet and excludes ($640mm) of pre-tax provisions related to Auction Rate Securities, Falcon fund and other one-time restructuring costs. Citigroup pre-tax profit reflects estimated last twelve months 3Q08 and estimated adjustments for exclusion of retail branch based advisors, institutional FAs and certain lending activities
(4)  
For Citi, figures are adjusted to exclude estimated branch based advisors/locations and institutional FAs; includes Quilter and Australia Smith Barney; FA figures based on January 2009 and client assets based on 3Q08; for Morgan Stanley, client assets are as of 3Q08 for comparability purposes; 4Q08 assets were $546Bn.
 
 
This slide is part of a presentation by Morgan Stanley and Citigroup and is intended to be viewed as part of that presentation. The presentation is based on information from the companies’ press release and conference call.
4
 
 

 
 
•  
Establish leadership position in Wealth Management
 
Wealth Management continues to be a very attractive business with longer-term growth potential across the globe
 
Combination creates an industry-leading global wealth manager with over 1,000 branches in the United States and significant international presence
 
•  
A leading global wealth manager with a superior distribution platform
 
•  
Both Citi and Morgan Stanley will retain their deposits accumulated prior to close
 
•  
Enhances client experience with a best-in-class product and service platform
 
•  
Expands distribution network for capital markets and asset management products
 
•  
Achieves scale economies and cost synergies
 
Significant value creation driven by estimated $1.1Bn in cost savings


This slide is part of a presentation by Morgan Stanley and Citigroup and is intended to be viewed as part of that presentation. The presentation is based on information from the companies’ press release and conference call.
5
 


 
 
Target Expense Efficiencies
 
 
Target Expense Efficiencies
   
Personnel
$320MM
   
IT / Operations
$350MM
   
Marketing / Professional Services
$180MM
   
Other Expenses
$230MM
   
   
Total
$1.1Bn
 




This slide is part of a presentation by Morgan Stanley and Citigroup and is intended to be viewed as part of that presentation. The presentation is based on information from the companies’ press release and conference call.
6
 
 

 
 
 
 

Morgan Stanley Smith Barney Global Wealth Management

Joint Venture





Presentation to Investors

January 13, 2009