Citigroup agreed to buy the $29 billion credit card portfolio of Sears, Roebuck and Co. for $6 billion cash, the companies said yesterday.
Under terms of the deal, Citigroup will acquire the MasterCard issuing business of Sears and its store label accounts. The companies also will enter into a long-term marketing and servicing alliance that Sears expects will generate $200 million in annual performance payments from Citigroup based on factors such as new accounts and credit sales generation.
Sears' domestic credit card business includes 59 million accounts, of which 23 million are active. This portfolio is described as the eighth largest in the United States and includes the largest remaining in-house private-label portfolio. The Sears proprietary card and Sears MasterCard will continue to be offered through Citigroup.
Sears, Hoffman, IL, will use the proceeds to retire debt, return cash to shareholders and for “general corporate purposes.” After retirement of debt, the company expects that $4 billion to $4.5 billion in cash will be available.
Sears also expects to save more than $200 million annually with Citigroup absorbing costs associated with Sears' zero percent financing program.
Upon completion of the deal, substantially all 8,300 employees of Sears' Credit and Financial Products business will be employed by Citigroup, which will also assume ownership of the business' operating facilities.
The deal has been approved by both boards of directors and is expected to close by year-end, subject to traditional regulatory review and closing conditions.
