Big Merger A Possibility As Top Firm's Board Meets To Discuss Crisis

No Profits Merge Sign

Citigroup's continued to get hammered Thursday, closing below $5-a-share, despite confirmation that Saudi billionaire Prince Alwaleed bin Talel, the company's largest individual shareholder, plans to increase his stake. The Prince said that he retained the full confidence in existing management and firm CEO Vikram Pandit (although he said that about former CEO Chuck Prince at one stage too. Soon after, Chuck was chucked).

The $5-a-share mark is said to be a critical benchmark, as many institutional investors are precluded from owning stock which trades below this level. Concerns are therefore growing that unless Citi can get its share price up above this threshold, there will be massive forced selling which will further cause the stock to spiral downwards. Not everyone, however, is negative on Citi stock. Ladenburg Thalmann analyst Richard Bove, for one, said that he would be a buyer of the stock, adding: 'It would take a Depression every bit as large and long as the 1930s debacle to shake this company'. Citi's market cap has now fallen, however, from a $270bn high to just $25.7bn.

Citi's board is, however, said to be meeting later today to discuss the bank's options. And nothing is said to have been ruled out, including further asset sales, the sale of the firm or a merger. And possible merger partners include Goldman Sachs, Morgan Stanley and State Street Bank. Both Goldman and Morgan Stanley are understood to have approached Citi back in September about the possibility of a merger, although Pandit is said to have dismissed a tie-up out of hand at that time. He may now have little option but to go along.

Finally, there have also been rumors circulating this week that China Development Bank is mulling over a bid for Germany's Commerzbank. Bloomberg quotes Commerzbank management board member Wolfgang Hartmann, who said: 'We haven't heard from the Chinese with respect to a takeover offer. We will bring the Commerzbank stock back to E10 on our own (it is current trading at around E5.95)'.

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