Citigroup to Operate Federated Credit Card Business
Citigroup has formed an alliance with Federated Department Stores Inc. to operate the retailer’s proprietary and co-branded Visa credit card businesses.
Under the terms of the agreement, Citigroup will purchase all receivables of Cincinnati-based Federated and The May Department Store Company (after its acquisition by Federated) in three separate transactions expected to produce after-tax proceeds of approximately $4.5 billion.
The companies have also entered into a multi-year agreement providing Federated with future ongoing payments based on credit sales and certain other performance metrics of the portfolio after the receivables sale is completed. Joint marketing initiatives for the credit card programs are anticipated.
Federated’s Financial, Administrative and Credit Services division, will continue to manage many customer service functions, and no job losses are expected. No changes are planned to Federated’s credit card or loyalty reward programs.
After Federated’s pending acquisition of May is finalized later this year, Federated expects to sell the May credit portfolio within 12 months.
