UK insurer Prudential is selling its British Internet banking operation Egg to Citigroup for around £575 million ($1.127 billion) in cash.
The surprise move comes a month after Prudential rejected an initial approach for the loss making Web banking operation from Citigroup.
Prudential originally put Egg up for sale in January 2004 following speculation that it had received a bid from US credit card company MBNA. A hoard of other companies were subsequently rumoured to be interested in the Web bank, including Citibank, Royal Bank of Scotland, HSBC and US credit card company Capital One which reportedly offered Prudential £1.4bn for Egg in June 2006.
The £575 million purchase price secured by Citigroup for 100% ownership of Egg is significantly below the business's market value of £1.1 billion when it was delisted from the stock market in February 2006.
Prudential de-listed Egg after buying out minority shareholders in December 2005 after failing to sell its majority 79% stake in the Internet bank. However Egg has continued to underperform following its delisting. The Internet bank lost £39 million in the first half of 2006 and in October Prudential warned that the unit was expected to report the same operating loss in the second half.
In a statement, Citigroup says it intends to retain the Egg brand and the unit will be combined with its UK consumer operations.
The purchase includes over three million Egg customers and online products and services including payment and account aggregation services, credit cards, personal loans, savings accounts, mortgages, insurance and investments. Citi says the acquisition will more than quadruple its UK credit card base.
Commenting on the acquisition, George Awad, CEO, Citigroup global consumer group, EMEA, says: "We like Egg's brand; we like Egg's platform; we like Egg's customer engagement model; and we like Egg's customer set. This is a terrific acquisition for Citigroup, because it provides us meaningful scale in consumer financial services in the UK, a key strategic market."
The transaction is expected to close in the next 60-90 days and is subject to regulatory approvals.