Citi to sell oil trading unit to Occidental Petroleum
New York: US banking giant Citigroup has agreed to sell its oil trading unit Phibro LLC to Occidental Petroleum for some 250 million dollars, the companies said Friday.
Citi, which has received massive US government aid to help it overcome losses in the financial crisis, said the sale would be at "net asset value" and that the proceeds would be "not material" to earnings.
The deal would close in the fourth quarter pending approvals.
"The decision to sell Phibro was the outcome of an evaluation of a variety of alternatives and is consistent with Citi`s core strategy of a client-centered business model," the bank said.
"The sale of Phibro does not affect Citi’s client-facing commodities business lines, which will continue to operate and serve the needs of Citi`s clients throughout the world."
Occidental said its net investment would be around 250 million dollars for Phibro, which is a trader in oil and gas.
"Phibro does not trade in any exotic derivatives or hold any level three type assets," Occidental said.
Phibro`s management team and its employees will remain with the company after closing, according to Occidental
It added that "significant portions of current and future bonuses will be deferred and retained by Phibro and paid out in future years."
According to the Wall Street Journal, Citi has been under pressure to unload the unit because of a 100 million-dollar annual pay package for Phibro head Andrew Hall.
The pay has generated controversy for a bank getting extraordinary government support during the financial crisis.
The US government has a stake of over 30 percent in the banking giant from its various capital aid programs.
Citi, once the world`s biggest financial services firm, has received 45 billion dollars in bailout funds from the government.
From 1997 until the second quarter of 2009, Phibro averaged approximately 200 million dollars per year in pre-tax earnings.
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