Leucadia National Corp. (LUK), an investor in mortgages, mining and vineyards, has teamed with Centerbridge Capital Partners LLC to bid for Citigroup Inc. (C)’s consumer- lending unit, two people familiar with the matter said.
The two firms, both based in New York, are among three groups still left in the bidding process for the CitiFinancial unit, according to the people, who didn’t want to be named because the talks are private. The groups are conducting due diligence and there is no deadline for a new round of bids, one of the people said.
Citigroup Chief Executive Officer Vikram Pandit tagged the unit for sale in the wake of the bank’s $45 billion bailout in 2008. He renamed it OneMain in December and began an auction process this year. Leucadia’s investments include a mortgage joint venture with Warren Buffett’s Berkshire Hathaway Inc., a 28 percent stake in Jefferies Group Inc. (JEF), a timber company in Idaho and a casino in Biloxi, Mississippi.
“They don’t hesitate to invest in assets that require them to get their hands dirty,” said Glenn Tongue, general partner with T2 Partners LLC, a New York-based hedge fund that owns shares in both Leucadia and Citigroup. “They generally take unconventional positions that make them look like contrarians when they take them, but they generally have the last laugh.”
Laura Ulbrandt, a spokeswoman for Leucadia, declined to comment. Jeffrey Aronson, managing partner of Centerbridge, also declined to comment.
The Citigroup unit lends money for purposes including auto repairs and remodeling kitchens, according to its website. Overall pretax losses since the second quarter of 2009 are about $1.3 billion, according to a bank presentation. Net of liabilities, Citigroup has the value of the business on its books at about $2 billion, people with knowledge of the bidding process said in March.
Leucadia is run by Salt Lake City-based CEO Ian Cumming and Joseph Steinberg, who have also invested the firm’s money in mining interests in western Australia and vineyards in the Napa Valley in California. The company reported a $10.5 million profit in the first quarter, compared with $191.5 million in the same period last year, and has $9.2 billion in assets. Shares have gained 25 percent this year through yesterday.
In December 2009, the firm was part of a joint venture with Berkshire Hathaway that bought the servicing and mortgage- lending business of bankrupt Capmark Financial Group Inc. Leucadia and Berkshire also invested together in Finova Group Inc. in 2001.
“They’re much more bottom feeders than Buffett,” said Jeff Matthews, author of “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett.” “They tend to get involved when things are really cheap and messy.”
Leucadia’s competitors for the Citigroup business include a group comprised of Brysam Global Partners LP, Blackstone Group LP, Carlyle Group and Thomas H. Lee Partners, the people said. Wilbur Ross, the billionaire investor, has withdrawn from this group, he said in an e-mail. He declined to elaborate.
Another group includes private-equity firms Apollo Management LP and J.C. Flowers & Co., the people said.
Citigroup rejected a bid made last month by Cerberus Capital Management LP, the New York hedge-fund and buyout firm led by founder Stephen Feinberg, the people said. John Dillard, a spokesman for Cerberus, declined to comment.
A group that included Clayton Dubilier & Rice LLC and Toronto-based Onex Corp. was also rejected, the people said. Tom Franco, a spokesman for Clayton Dubilier & Rice, declined to comment. Andrea Daly, Onex’s general counsel, didn’t return phone calls requesting comment.
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