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Citigroup to acquire Bisys to expand hedge-fund services

Citigroup Inc., the biggest US bank, agreed to buy Bisys Group Inc. for €1.08 billion ($1.47 billion) to expand the services it offers hedge funds and private-equity firms, Bloomberg reported.

Citigroup Inc. will pay €8.72 ($11.85) a share and a special dividend of 11 euro-cents (15 cents) a share at closing, the New York-based bank said in a statement today. Citigroup said it will sell Bisys Group Inc.'s retirement and insurance units to affiliates of buyout firm J.C. Flowers & Co., making the net cost of the deal €589 million ($800 million). The acquisition may speed Citigroup Inc.'s push to serve so-called alternative funds, the fastest growing segment of the asset-management industry. Hedge funds attracted $60 billion of new money in the Q1, nearly doubling the 2006 growth rate. Bisys Group Inc. “will extend Citigroup’s full-service client platform and reaffirm our focus on serving the needs of high-growth markets,” Michael Klein, co-president of Citigroup's investment-banking division, said in the statement. The business will become a part of Citigroup's Global Transaction Services group, which provides cash management for banks and businesses and processes stock and bond trades. The unit contributed $1.65 billion of revenue in the Q1, or 6.5% of the bank's total.

A sale would conclude Bisys's nine-month search for a buyer, begun when former CEO Russell Fradin left to become CEO of HR-firm Hewitt Associates Inc. Bisys appointed Chairman Robert Casale to serve as interim CEO and said in a statement it hired Bear Stearns to help “explore strategic alternatives” to increase shareholder value. In September, the company agreed to pay $21 million to settle allegations by the US Securities and Exchange Commission that it helped mutual funds use fee kickbacks to defraud investors. In October, Bisys agreed to pay $66.5 million to settle a shareholder lawsuit accusing the company of falsifying financial statements. Bisys was one of several industry representatives to contribute to a report by the International Organization of Securities Commissions in March that called for better independent oversight of hedge funds. (bloomberg.com)