Awards for Excellence 2002
Citigroup
Bankers need to be much more sure of themselves these days if they want to take an internet company public – especially one that doesn’t make any money. But that is precisely what Citigroup was preparing to do in February for online payments firm Paypal. One extra sticking point was that the firm faced lawsuits for potential copyright infringement. Then, one day before the scheduled launch, Paypal’s major competitor upped the ante by seeking a cease-and-desist order. “We stuck with our due diligence, held the book together, and managed to price the deal at the mid-point of the range,” says Rick Bartlett, head of US equity capital markets at Citigroup. “It’s now the best-performing IPO of the year, and is up over 100%.”
It’s unlikely that Citigroup would have been able to pull that off had it been the same firm as two or three years ago. Now, though, the equity division at Salomon – or Citigroup, as it is now known – has a much more confident air about it. And so it should. After gradually creeping up into the top four last year, the firm stands at the top of the US IPO league table. The $5 billion spin-off of Travelers from joint parent Citigroup helped enormously but Citi is still in the top three even if the deal is excluded. It also ranks top three for all equity and equity-linked issuance globally over the 12-month period from May 2001 to April 2002.
The economic environment has certainly helped Citi’s rise, explains global co-head of equities Arthur Hyde: “The tough equity markets have moved us to the top of the line, as they play to our strength in providing multi-product turnkey solutions to capital structure problems.” It’s no surprise, then, that Citi has also moved up the rankings in convertible bonds, placing third in the period May 1 2001 to April 30 2002.
Another factor in Citi’s favour is that is was not so caught out by the downturn. “We’re maniacal on costs,” says Hyde.
“But there’s no sense of panic due to current market conditions because we were behind the competition and needed to build up.”
They were lucky with timing there, as well. Citi was one of the main beneficiaries of the fallout from the mergers in summer 2000, especially of the merger of CSFB and DLJ – Citigroup set up an informal recruitment centre in a hotel a couple of blocks from DLJ’s midtown headquarters. Meshing bankers hired from various organizations together with those from the Salomon-Smith Barney merger has made for what Hyde calls “an eclectic culture”.
Citi is now concentrating on getting clients to do repeat business,” says global co-head Robert DiFazio. “And that’s the tough one. Clients know it’s competitive, and we know that we don’t own any of our clients.” One example they are particularly proud of is the string of deals for insurer the Willis Group. Citi led the IPO last June, as well as follow-ons in November and May. “We priced the IPO at $13, the first follow-on at $2 and the second at $30,” says Bartlett. It’s not just the repeat business that Bartlett and his bosses are so proud of but also the fact that the client was KKR, a well-known private-equity firm and a tough client for any bank. Nor is KKR the only private-equity firm to use Citi. “We’ve done 16 IPOs for nine different LBO firms since the start of 2001,” says Bartlett. “They’re not interested in whether we have a balance sheet when it comes to doing their IPO. All they care about is execution.”
Some of that execution strength comes from Citi’s trading expertise. Both Salomon and Smith Barney were good equity trading houses, and now Citi is the second-largest broker-dealer for all equities trading in the US, second in Europe and third in Asia for the 12 months ending April 2002, according to Autex.
Antony Currie
