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. Last Updated: 07/27/2016

Citigroup Buys Egg for $1.1Bln

LONDON -- Citigroup, the biggest U.S. financial-services company, agreed to buy Prudential's Egg Internet banking unit for £575 million pounds ($1.1 billion), quadrupling its credit card customers in Britain.

Citigroup, which will pay for Egg in cash, will gain about 2.9 million cardholders in the Britain, the New York-based company said Monday in a Business Wire statement. The purchase will add to Citigroup's earnings in the first year.

"We like Egg's brand; we like Egg's platform; we like Egg's customer engagement model; and we like Egg's customer set," George Awad, chief executive officer of Citigroup's Global Consumer Group for Europe, the Middle East and Africa, said in the statement. "It provides us meaningful scale in consumer financial services in the U.K."

Mark Tucker, chief executive officer of Prudential, has faced pressure to improve British profits and sales after rejecting a £16.9 billion bid from Aviva last year and predicting a loss at Egg in the second half of 2006. Tucker rejected an offer for Egg in December because it wasn't in "shareholders' interests," the company said at the time. Prudential had planned to cut costs by integrating Egg with its life insurance unit.

"It is a bit of a surprise given they have said Egg was a core business, but I think it makes perfect sense as Prudential is a life company and not a bank," said Kevin Ryan, an analyst at ING Financial Markets. "I would expect the market to take this decision well."

Shares of Prudential is valued at £17.5 billion. The stock is up 25 percent in the past 12 months, outpacing the 15 percent gain in the 29-member Bloomberg Europe 500 Insurance Index.

Prudential, which will use proceeds from the sale to cut debt, said it would improve earnings per share this year.

Egg has been a drag on Prudential earnings since 2002, when it expanded in France. In 2004, Egg closed the French unit and sold its French savings and brokerage unit to ING Groep NV. The unsecured lending division was sold to Banque Accord.