In return, ValueAct will support Citi’s board and management.

ValueAct Capital, one of the most followed activist hedge funds in the industry, first engaged with Citi in early 2018. Back then, ValueAct Capital acquired a stake in Citi, which is currently 1.3%. In January 2019, Citi and ValueAct entered an Information Sharing and Engagement Agreement valid through December 2019. The parties have revalidated the agreement for another two years.

The agreement allows for ValueAct to “have access to confidential information about the company and engage with members of Citi’s management team and Board of Directors on areas such as strategy, governance, and operational planning matters.”

In a quid pro quo, the hedge fund would support Citi’s management and its Board. Notably, ValueAct is one of Citigroup’s largest shareholders.

ValueAct: A seat on Citi’s board

However, owing to a conflict of interest, the hedge fund did not then pursue a seat on Citi’s board. At the time, it was represented on the board of Alliance Data Systems, a competitor to Citi.

Changes in Citi

After the January agreement, Citi has made changes in its top-level management. It appointed Jane Fraser as the head of the consumer bank and its president. Apparently, this was succession planning for CEO Mike Corbat’s position. Further, Citi veteran Mark Mason was appointed Chief Financial Officer. Lastly, Citi handed Paco Ybarra responsibility for the institutional client’s group.

Meanwhile, ValueAct no longer holds a seat on the board of Alliance Data Systems. This clears the way for it to get a seat on the board of Citi. However, according to the FT, ValueAct does not feel the need for one as the existing arrangement has worked very well.

Dylan Haggart, ValueAct, said: “What we have seen from inside Citi is incredible, holistic access and great management buy-in from Mike’s team.”

“Citi remains the top position in the fund, and we have strong conviction in its long-term potential,” said ValueAct President and Chief Investment Officer Mason Morfit in the statement.

Citi’s view on the arrangement

CEO Michael Corbat said: “We have a lot of respect for ValueAct as investors and look forward to continuing to work with Mason Morfit, Dylan Haggart, and their team.”

“They have been adding real value, and we expect they will continue to do so over the next two years,” he added.

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