Citigroup Extends Information-Sharing Agreement With ValueAct

20 Dec 2019, 02:24 AM IST

(Bloomberg) -- Citigroup Inc. extended an information-sharing agreement with ValueAct Capital Management for two years to help maintain the activist investor’s support for bank leadership.

“We have benefited from their expertise and we appreciate how committed they are to this investment,” Citigroup Chief Executive Officer Michael Corbat said Thursday in a statement. “They have been adding real value and we expect they will continue to do so over the next two years.”

ValueAct, which is run by Jeff Ubben, struck its original agreement with Citigroup in January, which allowed the bank to share confidential information on strategy in exchange for the investor’s endorsement of its executives and board. That deal was set to expire this month.

The arrangement is a first for San Francisco-based ValueAct, which prefers to place directors at companies in which it holds large stakes. The companies agreed in this case that a board seat wasn’t appropriate because ValueAct had a representative on the board of Alliance Data Systems Corp., a private label credit-card issuer and competitor to Citigroup.

ValueAct, which owns a 1.3% stake in Citigroup, said earlier that it would probably seek a seat on the bank’s board once the conflict was addressed. That hurdle was cleared in October when Kelly Barlow, ValueAct’s representative on the Alliance Data board, resigned his seat.

The hedge fund said in the joint statement that it has been “highly engaged” with Citigroup’s board and management on strategy, financial planning and growth opportunities.

“Citi remains the top position in the fund and we have strong conviction in its long-term potential,“ said Mason Morfit, ValueAct president and chief investment officer.

ValueAct disclosed its stake in Citigroup in May 2018, arguing the bank was undervalued and misunderstood by the market. Total shareholder returns have been roughly 19% since then, according to data compiled by Bloomberg. Citigroup has rallied about 50% this year, outpacing the 32% advance by the 24-company KBW Bank Index.

The bank has been rearranging many of its top executives in the past year. It elevated Jane Fraser to president in October, its second-highest rank, and put her in charge of consumer banking globally.

The New York-based firm has also been eliminating hundreds of jobs in its trading division as it seeks to improve the profitability of the business. And it’s been investing in its treasury and trade solutions unit, which generates steadier income by providing banking services to large, multinational corporations.

To contact the reporters on this story: Scott Deveau in New York at sdeveau2@bloomberg.net;Jenny Surane in New York at jsurane4@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Dan Reichl, Josh Friedman