On April 6, 1998, the merger between Citicorp and Travelers Group was announced to the world, creating a $140 billion dollar firm with assets of almost $700 billion dollars. The chairmen of both parent companies, John Reed and Sanford Weill, were announced as co-chairmen and CEOs of the new entity, Citigroup (NYSE:C), Inc., although the huge difference in management styles between the two immediately presented question marks over such a setup.
Presented as a merger, the deal was truthfully more like a stock swap, with Travelers Group purchasing all of Citicorp shares for $70 billion dollars, and issuing 2.5 new Citigroup shares for each Citicorp share. By using this ratio, existing shareholders of each company wound up owning about half of the new merged one. The new company maintained Citicorp’s “Citi” brand in its name but adopted Travelers’ distinctive “red umbrella” as the new corporate logo, and it was used until 2007.
The remaining provisions of the Glass-Steagall Act ; enacted following the Great Depression forbade banks to merge with insurance underwriters, and meant Citigroup had between two and five years to divest any prohibited assets. Sanford Weill stated at the time of the merger that they believed “over time the legislation will change. We have had enough discussions to believe this will not be a problem” The passing of the Gramm-Leach-Bliley Act in November 1999 proved Reed and Weill’s views, opening the door to financial services conglomerates with a mix of commercial banking, investment banking, insurance underwriting and brokerage services all under one roof essentially.
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