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 A five-year-old effort to press for changes at Citigroup Inc. by a major activist labor union just went into high gear.
In a letter sent to Citigroup's board late Friday, shareholder the American Federation of State County and Municipal Employees, or AFSCME, said it wants the bank to complete a strategic plan that includes splitting the company into two units in light of its financial problems stemming from the subprime mortgage credit crunch. AFSCME director Richard Ferlauto says he doesn't want to dictate specific terms, but thinks Citigroup should divide its commercial banking division from its investment banking unit. "We want to see Citigroup spin off its Citi Smith Barney division," says Ferlauto. AFSCME's letter follows an effort by the labor union fund to have shareholders vote to remove Citigroup directors at the megabank's April annual meeting. According to Ferlauto, between 25% to 30% of shareholders voted against the re-election of some Citigroup directors at the meeting. "This is a strong indication of unhappiness of the company's direction," Ferlauto says. The union isn't alone in calling for a Smith Barney Inc. spinoff. In February, Oppenheimer & Co. analyst Meredith Whitney appeared on Bloomberg TV suggesting that if Citi CEO Vikram Pandit can't right the ship, he may have to sell the investment bank. Since taking the helm last year, Pandit has started to give some assets the old heave-ho, but as Dealscape noted in April there is no official list of disposals. The assets sold so far include a private equity business in Japan, a joint venture with State Street Inc., and a German commercial banking unit, which fetched $7.7 billion. Additionally, Citi, which has lost roughly $54 billion due to the credit crisis, has already raised more than $40 billion of new capital mostly from sovereign wealth funds. - Ron Orol See AFSCME's July 18 breakup letter to Citigroup (pdf) Ron Orol is a Washington-based reporter for The Deal and author of Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World. Categories Deal Video
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