Washington Mutual Inc. (WaMu) announced it has agreed to sell its consumer finance unit to Citigroup's CitiFinancial Credit Co.
The $1.25 billion cash transaction involving the exchange of Washington Mutual Finance (WMF) is expected to close in the first quarter of 2004 once it is approved by regulators, said WaMu.
WMF is a Tampa, Fla.-based provider of home equity and consumer finance loans with total assets of $4 billion as of September 30, 2003, and has over 2,300 employees, reported Citigroup. CitiFinancial will acquire 409 WMF offices, located in 25 states, mainly in small communities in the Southeastern and Southwestern regions of the country.
"This transaction is good for all parties," reported WaMu, which has been the defendant in a blizzard of lawsuits connected to customer problems as a result of its aggressive pace of company acquisitions. WMFs smaller-market focus does not fit WaMu's strategy of targeting larger urban and suburban markets. The proceeds of its sale will allow the banking behemoth to accomplish financial objectives outlined for 2004, including the funding of retail store growth and asset generation.
As for Citigroup, the acquisition is a "perfect fit" as it will allow its consumer and subprime finance business arm, CitiFinancial, to expand into approximately 65 new markets and add 90 new branches in Texas, Florida and California, reported the company. CitiFinancial currently has nearly 1,600 branch offices in 48 U.S. states.
WMF will be another company integrated into CitiFinancial. CitiFinancial previously integrated subprime financial company The Associates and wound up paying a $215 million settlement with the Federal Trade Commission to resolve charges that the acquired company engaged in deceptive and abusive lending practices.