Citigroup wears two hats in Chevy Chase deal

Former Lehman Brothers Inc. banker Henry Michaels helped Citigroup Inc. land the mandate to sell Chevy Chase Bank FSB, the Bethesda, Md.-based thrift that agreed to be bought by Capital One Financial Corp. for $520 million on Dec. 4.

Michaels joined Citi's financial institutions group in 2006 along with four other Lehman bankers, including Sean Burke, who also worked on the deal. Michaels had been courting Chevy Chase for about a decade while at Lehman. Leading Citi's deal team was Gary Shedlin, chairman of the FIG group, with Nik Seksaria rounding it out.

An auction for Chevy Chase began in October, after its CEO, B. Francis Saul II, 77, decided to sell. Despite the market turmoil, it unfurled as "a standard process," a source says. But Citi's role as a sell-side adviser to and a bidder for Chevy Chase raised eyebrows.

Citi's interest in Chevy Chase was widely reported in November, though never confirmed. But sources close to the deal say Citi was actively involved in the auction's initial stages. "It's difficult to be a bidder and have to deal on the sell side with one of the banks that's also competing with you," says an adviser to a losing bidder. But, the adviser adds, Chevy Chase's board seemed to have no problem with the arrangement, and the issue became moot when Citi dropped out of the running after its stock plunged. That left BB&T Corp., Capital One, J.P. Morgan Chase & Co. and SunTrust Banks Inc. in the hunt.

Chevy Chase's sale will likely end the thrift's relationship with Mayer Brown LLP, where Scott Anenberg led the team that worked on the deal. He has worked with Chevy Chase for more than 25 years, bringing the thrift with him as a client when he left Shaw Pittman LLP in 2006. James Carlson, Edward Davis, Arthur Walker, Sterling Dorish and Tim Sherck of Mayer Brown also worked on the deal.

Capital One got financial advice from Credit Suisse Group's David DeNunzio, Chauncey Dewey, Greg Kennedy and Doug Simmons. The buyer also used Centerview Partners LLC's Adam Chinn, Steve Crawford, Sam Graziano and Aly Croffy. Chinn's former firm, Wachtell, Lipton, Rosen & Katz, provided legal advice. The law firm, where partners Edward Herlihy, Richard Kim, Jeremy Goldstein and Joshua Holmes handled the deal, has worked with Capital One since its 1994 spinoff from Signet Banking Corp. Cap One received advice on Chevy Chase's mortgage portfolio from K&L Gates LLP attorneys Larry Platt, Steve Kaplan, Phil Kardis II and Chad King.