Citigroup (NYSE:C) has made the decision to focus on and keep only those assets connected to their core banking business, and their latest divestiture will be their life insurance unit – Primerica.
The life insurance unit has filed for an initial public offering which will be as high as $252 million.
This isn’t the only part the deal to shed Primerica by Citigroup, as not only are the selling 18 million shares to the public, but they are also selling close to 17.2 million shares to Warburg Pincus, a private equity firm. There will also be warrants involved in the Warburg deal.
It seems the major reason for the initial public offering on the part of Primerica is to get some capital can use to then incentivize their workers, which the company has had a hard time retaining as competitors offer better deals for their employees.
Even with the IPO, that won’t remove most existing insurance policies from the books of Citigroup, although all new insurance policies written by Primerica will be on the life insurers books alone.
The IPO won’t completely remove the stake of Citigroup in the company either, as they’re retain somewhere between 32 percent to 46 percent stake in Primerica, while Warburg Pincus will have a stake in the company from 23 percent to 33 percent. So technically, if Citigroup emerges on the absolute lower end and Warburg Pincus on the higher end, Warburg could end up being the largest shareholder in Primerica, although that’s an unlikely scenario immediately after the IPO.
But that will change either way toward Warburg, as Citigroup has no plans to keep its stake in Primerica any longer than it has to. They will obviously use it to raise capital of its own through selling its Primerica shares. And if they go up, that will be a nice windfall for Citi.
The opening share price is expected to be from $12 to $14 a share, according to the regulatory filing. All net proceeds of the IPO will go to Citigroup.
Primerica should be listed on the New York Stock Exchange under the symbol “PRI.”
