Citigroup & ABN AMRO? The Chuck Prince Conundrum

There are multiple reports that Citigroup (C-NYSE) may have a faction inside the company pushing Chuck Prince to jump into the bidding process for ABN AMRO (ABN-NYSE/ADR).  This would be to nudge out Barclays (BCS-NYSE/ADR), or maybe Citigroup would just go after a part of the company.  Back in February we ran a list of companies that were actually large enough to go after ABN AMRO (ABN).  It is somewhat surprising that Bank of America (BAC-NYSE) has been left out here, as this would give them a much wider international footprint and would not cause any regulatory issues in the US.  But back to Citigroup.

Citigroup also has acquired a 19.9% stake in an Indian brokerage firm by the name Anand Rathi Securities.  Anand Rathi provides a variety of financial services in asset management, investment banking, stock brokerage, trading, commodities, mutual funds and insurance.  It recently has been in a bidding war (against itself) over Nikko Cordial in Japan for something to the tune of $11 Billion.

What is puzzling as hell here is the Chuck Prince conundrum.  He took down a $26 million pay package last year, up from rougly $23 million the year before.  A recent homebuilder’s CEO describing the 2007 homebuilding market would describe how shareholders feel about Chuck Prince.  This stock has massively lagged, Prince Alwaleed bin Talal has called for Draconian neasures in cost cuts, I have listed him as a CEO that needs to go, media reports keeps telling him he needs to go, Cramer said he needs to go, and so on.   If his pay is GOING UP and if there is pressure being put on him to do more, then you just have to wonder what the board and what key shareholders want. 

The company has its earnings scheduled for April 16, and its annual shareholder meeting is the next day on April 17, 2007.  As earnings get closer, the CEO pressure is going to build from shareholders and from the media.  If there is another ho-hum performance and the outlook isn’t much better, then I can tell you what the shareholders will really be pushing for on April 17.  I did lay out a scenario that he could take to leave as well, so we’ll see.  Chuck Prince is also being pressured to cust costs (and maybe jobs), and if he has to cut several thousand jobs to save his own it won’t exactly make him much more popular.

Jon C. Ogg
March 23, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.