Since five of the world's largest banks first started going hat in hand to big investors for cash infusions last October, their stock prices have fallen by almost 13% on average, according to Thomson Financial. Yet on Jan. 15, another group of investors stepped up and participated in a $12.5 billion private offering at Citigroup. The roster included some of the usual suspects, such as Citigroup's (C) major shareholder, Prince Alwaleed bin Talal, and foreign sovereign wealth funds. But several new names of investors picking up big stakes in financial-services companies also popped up, including Citigroup's architect and former chief, Sanford I. "Sandy" Weill.
Senior Writer Emily Thornton spoke with Weill about his decision to invest in Citigroup. Weill wouldn't say how many more Citigroup shares he's bought. (He holds about 16.6 million shares, according to his most recent official filings made in April, 2006.) But he had plenty to say about Citigroup's new CEO, Vikram Pandit, and financial services in general. Below are excerpts from their conversation:
How did this investment come about?
Several weeks ago I spoke to Vikram [and said] that if part of Citigroup's plan turns out to be going for a second equity infusion to raise money, I would help introduce them to some people who are good relationships of mine and that I would be very interested in investing my own money. Last week they gave me a call and said they would be doing a deal and if I was interested in investing they'd love to have me. I said I'd be happy to be part of the group because I believe this company has a great future.
Why is that?
I believe in what they're doing to substantially strengthen the balance sheet. [All told] it's about $30 billion of new capital. That will give the company the ability to put their problems behind them and concentrate on building for the future. If you look at their report today, a lot of the businesses did very well, like the international consumer business, the wealth-management business, the transaction-services business. The losses were very concentrated in just a few segments of the business.
I feel good about what I did. And I feel good about Vikram's emphasis on strengthening the balance sheet. Second, I think they will focus on costs. I think he recognizes that one has to be a low-cost producer to be successful. And I think he's a team builder. He believes that teams win. By focusing on these three things, they'll be able to concentrate on growing the business in a very dynamic segment of the world economy as you see growth in the middle classes through emerging markets.
I've known Vikram for nearly 20 years. He knows what needs to be done. He knows we have to create a new team with the best management in the world. And that doesn't happen in one day. I know people are upset today that he didn't do everything the first minute. He'll get there.
So how much have you invested?
I'm not saying anything about those things. I don't have to.
Nope. You don't. But how big a shareholder do you hope to be? As big as the investors we're seeing from the Middle East?
I don't have any oil wells in my backyard.
What's your view of all of the money being accepted by banks from foreign investors?
I think it's positive. It shows what investors feel about the financial business and specifically Citigroup. If they end up having lots of dollars from products they sell to us, they should have the ability to invest those dollars. These are long-term shareholders. For Citigroup to have investors who go from New Jersey, to California, to the Middle East, to Asia is a very good thing. If you look at Prince Alwaleed, he invested in Citigroup in 1991. I met him in 1997. He's been a phenomenal shareholder and supporter of Citigroup for the last 10 years that I've known him.
BusinessWeek's Emily Thornton talks to Sandy Weill about his investment in a private offering at Citigroup
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