New York, NY, June 6--Citigroup has agreed to buy the credit card receivables portfolios of Federated Department Stores Inc. and May Department Stores Co. following the merger of the two retailers.
Citigroup said it will pay an 11.5 percent premium for the $4.4 billion Federated portfolio and the $2.2 billion May portfolio and expects the deals to add to its earnings in the first year.
Federated said it expects after-tax proceeds of $4.5 billion from the sales.
Citigroup, the world's largest financial services company, also agreed to a long-term agreement with Federated under which the companies will partner to manage Federated's credit card business, including existing and new accounts.
Citigroup said it expects the sales to close in the third quarter.
Some of the receivables from Federated's retail operations are owned by General Electric Co.'s GE Capital finance unit.
In November 2003, Citigroup completed the purchase of Sears, Roebuck & Co.'s credit card portfolio and paid a 10 percent premium, or about $2.9 billion, on the retailer's $28.6 billion of private-label and bank card credit card receivables, plus $300 million for other assets, offices and employees.
