UPDATE 4-U.S. exits Citigroup stake, earns $12 bln profit

* Treasury sells 2.4 bln Citi shares at $4.35 each

* Treasury can still sell Citigroup stock warrants

* Exit in one large offering follows GM’s successful IPO

(Changes headline; adds detail on profit from share sales)

By David Lawder

WASHINGTON, Dec 6 (BestGrowthStock) – The U.S. government sold off
its remaining shares in Citigroup Inc on Monday for
$4.35 each, marking an exit from ownership in the bailed-out
banking giant with a $12 billion gross profit for taxpayers.

The U.S. Treasury said it will take in $10.5 billion in
sale proceeds from a public offering of 2.4 billion Citigroup
shares, announced just hours earlier. The price is 10 cents
below the $4.45 closing price on the New York Stock Exchange.

“By selling all the remaining Citigroup shares today, we
had an opportunity to lock in substantial profits for the
taxpayer and avoid future risk,” said Tim Massad, Treasury
acting assistant secretary for financial stability.

“With this transaction, we have advanced our goals of
recovering TARP funds, protecting the taxpayer, and getting
the government out of the business of owning stakes in private
companies,” Massad added in a statement.

The Treasury invested a total of $45 billion to bail out
Citigroup in 2008 and 2009 during the financial crisis. The
company paid back $20 billion in preferred stock, while
another $25 billion was converted to 7.7 billion common shares
held by the Treasury.

It had whittled that stake down over the past year from 27
percent to less than 7 percent through controlled sales in the
market.

The move to sell the remaining shares in one large
offering follows last month’s successful initial public
offering in General Motors Corp , which significantly
reduced the government’s stake. The GM IPO attracted strong
interest from domestic institutional investors and foreign
sovereign wealth funds alike.

“Citi is pleased that the U.S. Department of the Treasury
has finalized plans to exit from its remaining holdings of
Citigroup common stock. We are very appreciative of the
support provided by the Treasury during the financial crisis,”
Citigroup spokesman Jon Diat said in a statement.

The offering, run by Morgan Stanley as bookrunning
manager, is expected to close on or about December 10, 2010.
Underwriting fees for the transaction will be paid by
Citigroup, Treasury said.

IN THE BLACK

The Treasury said its estimate of a cumulative $12 billion
profit from the $45 billion bailout includes gains from the
sale of common stock of around $6.85 billion, interest and
dividends of $2.9 billion and $2.2 billion in Trust Preferred
Securities it received for guarantees on a pool of Citigroup
assets.

Treasury averaged a price of $4.14 for each of the 7.7
billion Citgroup shares it sold. It received the shares at a
conversion rate of $3.25 each.

The sale, however, does not completely free Citigroup from
the government’s clutches. The Treasury also said it would
continue to hold warrants to purchase Citigroup shares issued
as part of the bailout. These may be repurchased by Citigroup
or sold in a separate auction for an additional profit.

The Treasury also said it is entitled to receive some $800
million in Citigroup Trust Preferred Securities from the
Federal Deposit Insurance Corp under a debt guarantee program
— provided that the FDIC incurs no losses on Citigroup debt
it backstopped during the financial crisis.

The Treasury next year is expected to begin selling off
its stake in bailed-out insurer American International Group
, and it anticipates a profit on the complex series of
transactions.
(Additional reporting by Glenn Somerville in Washington,
Paritosh Bansal and Maria Aspan in New York; Editing by
Muralikumar Anantharaman)

UPDATE 4-U.S. exits Citigroup stake, earns $12 bln profit