Thursday, October 23, 2008

From the Wall Street Journal

Weill Seeks to Gain From Pain --- Considers Fund to Invest in Battered Financials

Sanford Weill, the architect of Citigroup Inc., is considering a plan to profit from the same turmoil that has clobbered the banking giant.

Mr. Weill, who pulled off the deal that created Citigroup a decade ago and became its chairman and chief executive, is in talks about launching a private-equity fund that would invest in beaten-down financial companies and assets, according to people familiar with the matter.

Mr. Weill's potential partners are Michael Klein, who was co-head of Citigroup's investment bank until he left in July, and Michael Masin, former chief operating officer at the New York company.
Such ventures often fizzle before getting off the ground, so it isn't clear if Mr. Weill will go through with the plan. In recent weeks, though, Mr. Weill's team has reached out to potential investors, including sovereign-wealth funds, outlining their strategy and gauging interest in putting money into such a fund, people familiar with the discussions said. The tentative goal is to raise about $5 billion.

Launching the fund would mark a new chapter in Mr. Weill's storied financial career. In 1986, he bought a troubled Baltimore-based lender that became a vehicle for building a global financial juggernaut that culminated in Citigroup. Now 75 years old, Mr. Weill stepped down as CEO in 2003 and as chairman in 2006.

In recent years, Mr. Weill has devoted much of his time to two philanthropic ventures, Carnegie Hall and the Weill Cornell Medical College.

Meanwhile, Citigroup has suffered, piling up four straight quarterly losses that have caused its shares to plunge 55% since the beginning of the year.
In 2005, Mr. Weill was preparing to launch a private-equity fund but shelved the idea following an outcry from Citigroup's board, which worried that the venture might compete against the company.

Mr. Weill has remained obsessed with Citigroup, frequently offering his advice to bank executives. Last year, after handpicked successor Charles Prince resigned under pressure, Mr. Weill volunteered to return to the company. Citigroup directors declined his offer.
Earlier this year, he joined sovereign-wealth funds, public pension funds and other investors who pumped $12.5 billion into Citigroup in exchange for preferred stock. At the time, Citigroup's stock was trading at about $28 a share.
The shares fell 6.1%, or 86 cents, to $13.32 apiece in New York Stock Exchange composite trading Wednesday at 4 p.m.

Mr. Klein is a charismatic investment banker with a bulging Rolodex. Since leaving Citigroup, he has advised the U.K. government on handling the financial crisis and recently landed a fellowship at Princeton University's Woodrow Wilson School of Public & International Affairs.

Mr. Masin got to know Mr. Weill during their time together as trustees at Carnegie Hall. Mr. Weill recruited him to join Citigroup's board and later hired him as chief operating officer. Mr. Masin left Citigroup in 2004 and is now a senior partner at law firm O'Melveny & Myers LLP.

Messrs. Weill, Klein and Masin either declined to comment or didn't respond to requests.

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