Citi, Springleaf Strike Deal for OneMain

EVANSVILLE, IN—Consumer lender Springleaf Holdings Inc., majority owned by Fortress Investment Group, has agreed to acquire Citigroup's subprime lending unit OneMain Financial for $4.25 billion. The deal, which continues Citi's selloff of non-core businesses, is expected to close in the third quarter.

Springleaf's CEO, Jay Levine, says the acquisition is “a transformational transaction, bringing together two best-in-class personal finance businesses to create a combined company that we believe is financially strong and optimized for growth. With complementary branch networks, a leading digital presence, and an ongoing commitment to responsible lending practices, we are positioned to serve a significant portion of Americans.” The combined company is expected to have 1,967 branches across 43 states, with pro forma consumer finance receivables of just under $14 billion.

Wes Edens, co-chairman at Fortress, says that with his company owning about 73 million shares in the publicly traded Springleaf, “we believe this is a compelling transaction, both strategically and financially. It brings together two companies with similar cultures and exceptional management teams, singularly focused on meeting the everyday financing needs of an enormous population of working Americans.”

At Citi, CEO Michael Corbat says that “While this business didn't fit our strategy, it serves customers who deserve and need credit.” The Wall Street Journal reported this past September that Citi was preparing to either sell or spin off OneMain. The business is part of Citi Holdings, established in 2009 to divest non-core assets.

Since Citi Holdings' establishment, Citi has sold more than 60 businesses and reduced assets in Citi Holdings by more than $700 billion. Citi Holdings' assets as of Dec. 31 represented approximately $100 billion, or 5% of total Citi assets, down from a peak of more than 30%.

Levine will lead the combined company as CEO, while Mary McDowell will continue as CEO of OneMain. Initially, the combined company will maintain both the Springleaf and OneMain brands, with the Springleaf brand phased out beginning in mid-2016. After closing, the combined company will be run from Springleaf's executive office in Hartford, CT.

Bank of America Merrill Lynch, Barclays, Credit Suisse and Goldman Sachs provided financial advice to Springleaf on the transaction. Skadden, Arps, Slate, Meagher & Flom LLP provided legal advice to Springleaf on the transaction. Advising OneMain on the transaction was Citi as financial advisor and Davis Polk & Wardwell as legal advisors.