CitiStreet sale OK with its clients

CitiStreet's defined contribution plan clients are sticking with CitiStreet even though the firm is being sold.

On May 2, ING Group, Hartford, Conn., agreed to acquire CitiStreet LLC, Quincy, Mass., for $900 million. CitiStreet, a record keeper to mostly public defined contribution plans, is jointly owned by Citigroup Inc., New York, and State Street Corp., Boston.

Executives of the $1.8 billion 401(k) plan sponsored by South Carolina Retirement Systems, Columbia, are not planning to make any changes. “We did an RFP last year, hiring CitiStreet, and we are not planning to do another,” said Sarah Corbett, assistant director for South Carolina's plan.

Sharon Dickerson, executive director for the $400 million Arkansas Deferred Compensation Fund, Little Rock, said board members were told of the pending deal but aren't very concerned about disruptions. “It will be business as usual. I don't anticipate any changes,” she said.

Bill Damsel, assistant director of defined contribution plans for the $200 million 401(a) plan sponsored by the Ohio Public Employees Retirement System, Columbus, said CitiStreet officials “sent us a letter saying that our members will not be impacted and assured us that service will remain the same. We don't expect any change in our relationship with them.”

Said Phil Lussier, chairman and chief executive officer of CitiStreet: “We've been talking to clients ... and it's been going great. There's been a lot of press on the rumors and speculation, but the message we delivered to our customers is that we will be doing the same thing, with the same people, on the same platform.”

ING executives do not expect to lose CitiStreet clients. “We don't see a disruption in the client base,” said Kathleen Murphy, CEO of ING US Wealth Management. “Citi-Street is communicating with clients and the cultures of both organizations are very complementary.”

ING will keep CitiStreet's Quincy and Boston offices, said Ms. Murphy.

As far as changes to CitiStreet's senior management, Ms. Murphy said plans are still being worked out. “We think very highly of their management team and it's only day three,” she said on May 6, three business days after the deal was announced.

“We have spent time with Phil (Lussier) and Sandy (McCarthy, president of CitiStreet's retirement services division) over the past month or so and think very highly of their leadership,” said Ms. Murphy.

“There's a lot of work to be done and from the organization's perspective, there is a lot of talent here,” said Mr. Lussier.

Once the deal closes, expected in the third quarter, ING will have a combined $351 billion under management and administration, making it the third-largest record keeper, after Fidelity Investments, Boston, and TIAA-CREF, New York, according to ING. On its own, ING has $89 billion.

“The market is converging and it will continue to consolidate,” said Ms. Murphy, adding that the deal “simply made sense.”

CitiStreet brings a lot to the table, including some new business areas for ING, she said.

“In addition to their focus on the mid- and large (DC plan) corporate market, they also offer DB plan services, total benefits outsourcing and health and welfare administration. We see these markets as a great growth opportunity,” said Ms. Murphy.

Ms. Murphy isn't ruling out other acquisitions down the road. “This is a key growth sector for ING. We want to maintain a strong leadership position and we will be in this (business) for the long term. Other deals are a possibility,” she said.

CitiStreet's parent companies are focusing on other business areas.

“CitiStreet is an industry leader, but retirement plan record-keeping and administrative services are not strategic priorities for us,” Charles D. Johnston, president of Citi Global Wealth Management, said in a news release.

“In the eight years since its launch, CitiStreet has had steady growth and become a leading benefits servicing provider,” Ronald E. Logue, chairman and CEO of State Street Corp, said in the release. “This transaction recognizes the strong business we built while enabling us to focus resources on businesses that are more closely aligned with our long-term strategy.”

Contact Jenna Gottlieb at [email protected]