Barclays in Egg credit cards deal
Tuesday 01 March 2011
Banking giant Barclays said today that it has struck a deal to acquire more than one million credit card accounts belonging to internet bank Egg.
The proposed switch to Barclaycard, which is subject to regulatory approval, follows an agreement with Derby-based Egg's US owner, Citi.
The credit card portfolio is the largest part of Egg, which opened for business in 1998 as one of the UK's first internet-only banks. Other Egg products covering savings, insurance, loans and mortgage will remain with Citi, while the US bank has retained the Egg brand.
Citi acquired Egg from Prudential for £575 million in early 2007 before the credit crunch and recession struck.
However, Egg has been squeezed by the downturn and heavy online competition, while Citi has been under pressure to shrink its balance sheet after a huge bail-out put a third of the business into public ownership.
Barclays said the acquisition valued the assets at a "significant discount" to the approximate £2.3 billion valuation of account balances. Completion of the deal is expected to take place in the first half of this year, it added.
The Egg business, which has 1.15 million credit card accounts, employs around 1,500 people, with the majority based in Derby.
The terms of the sale were not disclosed but the transaction is expected to result in an after-tax gain for Citi.
The US bank added: "Citi is committed to working with Barclays on a seamless transfer of the customer accounts, ensuring continuation of the high level of service to which customers are accustomed."
The future ownership of Egg has been the subject of long-running speculation, with reports in October suggesting a deal was on the cards with Barclays that could value Egg at between £300 million and £450 million.
After failing to sell the business, the Pru took full control of Egg in 2005 by buying out minority shareholders in a deal that valued the internet bank at more than £900 million.
But following two years of disappointing performances Pru agreed to sell the business to Citigroup in January 2007.
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