Citicorp–Travelers Group Merger

Abstract

Citigroup made 315 acquisitions and took stakes in 242 companies during the period 1981–2002. On April 7, 1998, Citicorp and Travelers Group announced merger plans to create the world’s largest financial services company with banking, insurance, and investment operations in 100 countries. The stock swap deal valued each company at $70 billion. The combined firm with $698 billion of assets became the largest financial services company globally which was slightly larger than Bank of Tokyo-Mitsubishi. The new company was called Citigroup. The combined company had 100 million customers in 100 countries. The thrust of the deal was to create one-stop financial shopping for consumers offering Citicorp’s strengths of traditional banking, consumer finance, and credit cards along with insurance and brokerage services from Travelers and its units. The merger resulted in the first truly global financial services supermarket which offers products from traditional banking to investment broking and insurance policies. In the stock swap deal, Citicorp shareholders received 2.5 shares in Citigroup for each of their Citicorp shares. Citicorp and Travelers shareholders owned 50% each of the company. The merger deal gave Travelers the ability to market mutual funds and insurance to Citicorp’s retail customers, whereas Citicorp got access to the expanded client base of investors and insurance buyers for Travelers (https://www.ft.com/content/adb7e4a6-019d-11dd-a323-000077b07658 ). The merger witnessed problems of cultural integration. Bloated costs, outmoded technology, and retention of employees were the major problems faced by Citi following the merger deal. The cumulative return for 279-day period for Citicorp during the merger period was 35.4%. The cumulative return for Travelers Group during the 279-day period surrounding the merger period −10 days to +268 days was −41.49%. When the expected synergies didn’t materialize, Citigroup spun off Travelers Property and Casualty into a subsidiary company in 2002. In 2005, Citigroup sold Travelers Life and Annuity to MetLife.