NEW YORK, April 6: Banking giant Citicorp and financial services titan, Travelers Group Inc, said on Monday they plan to merge in the largest-ever corporate marriage, creating a global powerhouse to be called Citigroup.The companies said the new firm will be led jointly by Citicorp Chief John Reed and Travelers head Sanford Weill.Terms of the transaction call for Citicorp shareholders to exchange each of their shares for 2.5 shares of the new Citigroup in a tax-free swap. Travelers share will become shares of the new company on a one for one basis.Following the merger, each company's shareholders will own 50 percent of the new entity.Based on Friday's closing share prices and the shares outstanding in the companies' most recent quarterly reports, the deal values each company at about $ 70.6 billion. For Citicorp, that value is $ 5.1 billion higher than its market capitalization as of the close of stock trading Friday.Citicorp closed on Friday at $ 142.875 and Travelers at $ 61.69 in composite NewYork Stock Exchange trading. Citicorp had 458 million shares outstanding and Travelers had 1.15 billion shares outstanding, according to their most recent quarterly reports."This is a combination whose time has come," the companies said in a joint news release.Citigroup will serve more than 100 million customers in 100 countries, they said. The companies said they expect to generate substantial incremental earnings from cross-selling opportunities of their products, as well as cost savings that will come from the Union.The merger is expected to close in the third quarter. Based on 1997 results, Citigroup will have assets of nearly $ 700 billion, net revenues of nearly $ 50 billion, operating income of about $ 7.5 billion and equity of more than $ 44 billion.With revenues of about $ 50 billion, Citigroup would have ranked 11th on last year's Fortune 500 list of America's largest corporations. The formation of the new company will occur through a merger of Citicorp into Travelers, which will applyto the Federal Reserve to become a bank holding company.Citicorp preferred stock will be automatically converted into preferred stock of the new company with the same terms and conditions. The combination is expected to be accounted for as a pooling of interests. Until now, Citicorp had not participated in the wave of transactions that has swept through the banking industry due to the gradual easing of federal rules governing the separation of banks and brokerages.
