Abu Dhabi buys $7.5bn Citi stake

Following private placements with Apollo and Carlyle, the sovereign wealth fund has inked a deal for a 4.9 percent stake in Citi, whose alternatives arm manages nearly $62 billion.

Citi, the world’s largest bank, has agreed to sell a $7.5 billion stake to the Abu Dhabi Investment Authority, in what is the latest example of a financial services-related private placement agreed by an oil-rich sovereign wealth fund.

The ADIA has agreed not to own more than a 4.9 percent stake in the bank, will have no ownership or controlling position, nor any role in the bank’s management or governance, according to a statement.

Win Bischoff, Citi’s acting chief executive while it seeks a replacement for Charles Prince, said capital from the private placement will allow it to pursue attractive growth opportunities in line with previously announced initiatives such as its plan to purchase 32 percent of Japan’s Nikko Cordial.

“In addition, ADIA is a significant participant in alternative investments and emerging markets financial services, two areas in which we have major positions and have been expanding,” Bischoff said in a statement.

Citi’s $62 billion Alternative Investments division, which invests across five platforms including private equity and infrastructure, is likely a large attraction for the ADIA.

In addition to being a frequent investor and co-investor with the world’s top buyout fund managers, the ADIA recently bought a 9 percent stake in US private equity firm Apollo Management, a growing trend among alternative fund managers and sovereign wealth funds.

Last month, in the lead up to its initial public offering, US hedge fund manager Och-Ziff Capital Management sold a 9.9 percent stake, valued at just north of $1 billion, to Dubai International Capital. The deal is reminiscent of the $3 billion stake The Blackstone Group sold to China pre-IPO.

And in September, the Carlyle Group agreed to sell a 7.5 percent stake to an affiliate of Mubadala, the Abu Dhabi Government strategic investment and development company, for $1.35 billion.