The Roseland, New Jersey-based BISYS announced the $1.45 billion-deal Wednesday under which BISYS shareholders will get a total of $12 per share – $11.85 paid by Citigroup and $0.15 paid by BISYS when the deal closes. The total purchase price will be $1.47 billion. The company said the closing is expected in the second half of 2007.
Simultaneously, private equity firm JC Flowers will acquire BISYS’ Retirement Services business and its Insurance Services Group from Citigroup, according to the announcement.
“JC Flowers’ acquisition of BISYS’ life insurance and retirement services business has the potential for creating a leading integrated provider of wholesale insurance brokerage and retirement services solutions,” the announcement asserted. Flowers will combine its existing commercial insurance business, Crump, with BISYS’ Commercial Insurance Services
Under the deal, Citigroup would c ombine BISYS Fund Services and Alternative Investment Services, which provide administration and distribution services for mutual funds, hedge funds, private equity funds, and other investment products, with its own operations.
Citigroup said in a separate announcement that its net cost after the Flowers transaction is expected to be about $800 million.
“BISYS and Citi are a great fit,” declared Michael Klein, Co-President of Citi Markets & Banking, in the Citigroup statement. “BISYS Investment Services division propels Citi into a market leading position in hedge fund administration and mutual fund servicing, and integrating it into Citi’s global network will extend our full service client platform and reaffirm our focus on serving the needs of high growth markets including private equity and hedge funds.”
Last year, BISYS agreed to pay $25.1 million to settle a U.S. Securities and Exchange Commission probe into its payment of marketing and distribution costs for shares of some mutual fund clients. It also restated more than three years of results after uncovering accounting errors (See BISYS Reveals Proposed $25.1M SEC Deal on Financial Restatements ).
Several weeks ago, JC Flowers became part of a buyout group to acquire education lender Sallie Mae as part of a $25 billion-deal. Observers asserted Wednesday that Flowers’ involvement in the Citi/BISYS deal was a testament to the strategic importance of the retirement services space.