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Citigroup Spin-Off Primerica Boasts Strong Stock Debut in Hot IPO Market

Citigroup Inc. (NYSE: C) on Thursday debuted its insurance spin off Primerica Inc.'s (NYSE: PRI) stock with soaring results, as 2010 proves to be a strong year for initial public offerings (IPOs).

The stock opened strong Thursday morning with 21.36 million shares at $15.00, and closed up 31% at $19.65 a share.

Primerica wanted to sell 18 million shares at $12 to $14 per share and raise $290 million, but exceeded expectations with more than 21 million shares at $15 each for a $320.4 million sale.

Citigroup is divesting itself of assets not related to banking to streamline business and boost capital. The bank last year tried to sell Primerica – a direct-marketing financial services firm – but received offers too low to consider. Citigroup suffered steep losses the past two years and took $45 billion in government bailout funds.  

"The Primerica public offering and private sale are in line with Citi's strategy to reduce non-core assets, tightly manage risks and optimize the value of assets in Citi Holdings, while working to generate long-term profitability and growth from Citicorp, which comprises the company's core businesses," the bank said in a statement.

Primerica sells insurance, annuities and funds to middle-income families, and feels focusing on this market niche is boosting its success.

"No one else has our business model," said co-chief executive officer Rick Williams. "No one else focuses on the middle-income, middle market like we do."

The company's net income jumped to $494.6 million in 2009 – three times its 2008 profit of $167 million.

Ownership of Primerica is now split between shareholders, private equity group Warburg Pincus and Citigroup. Citi owns 43% and said in a statement it will sell the rest "as soon as practicable, subject to market and other conditions."

Citi also agreed to sell over 17 million Primerica shares and warrants and purchase 4.3 million additional shares to Warburg Pincus. Those sales should earn Citi $230 million.

Citi will take all the offering's proceeds and most of Primerica's existing accounts, while Primerica will keep its new policies and rely on new business from sales to fuel growth.

Primerica joins the successful IPO market of 2010, in which eight U.S. venture-backed companies raised $711 million during the first quarter, matching the total number of IPO offerings in 2009.

"After two difficult, nearly dormant years for IPOs, venture-backed companies started 2010 with a strong showing in the public market," Jessica Canning, global research director for Dow Jones VentureSource, told Atlanta Business Chronicle. "With investors looking to take advantage of the open IPO window and 44 U.S. venture-backed companies in IPO registration, 2010 will be an active year as long as the public markets continue showing interest in venture-backed offerings."

The first quarter of 2010 was the most active for venture-backed company IPOs since 2007's fourth quarter, and incredibly more active than 2009's first quarter – when no venture-backed companies went public.

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  1. Michael Eaton | April 4, 2010

    So, ………… Where's my shareholder of Citigroup share ?

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