Citigroup pays $3 bln for stake in Turkey's Akbank

Citigroup also said on Tuesday it acquired right of first refusal over any shares in Akbank which its main owner Sabanci Holding may sell in the future.

Analysts and bankers said that without such an option it would be hard to fathom the merits of Citi's 20 percent deal with Akbank, Turkey's second largest private bank by assets and one of the most profitable in the country.

Citigroup, which already has a small banking presence in Turkey, agreed to pay 9.5 lira a share for the stake in Akbank, a 17 percent premium over Tuesday's closing share price.

The deal is the latest in a string of foreign banking purchases in EU-applicant Turkey, which is experiencing a return to strong economic growth after a 2001 financial crisis.

Banks, including Dexia, BNP Paribas and Fortis, already operate in Turkey, whose economy is set to grow as much as 6 percent this year.

The deal is Citi CEO Charles Prince's largest purchase since he became chief executive in October 2003 and will help fulfill a goal of generating half of profit and revenue from consumer banking, its largest business, from outside the United States.

The U.S. bank is purchasing 28 billion shares from Sabanci Holding subsidiaries and the Sabanci family, while 20 billion new Akbank shares will be issued in a reserved capital hike for Citigroup, the banks said in a statement.

Subject to certain exceptions, including purchases from Sabanci and its subsidiaries, Citigroup has also agreed not to acquire further shares in Akbank, the joint statement said.

The deal also brings a strategic collaboration between Citigroup and Akbank, including the pursuit of new commercial activities and joint ventures.

Citigroup has been in Turkey since 1975 and has a staff of more than 2,000 in corporate, commercial and retail banking, but has not seen as much growth as some rivals, partly due to Turkish brand loyalty with domestic banks.

Akbank is considered by analysts as among the most profitable in Turkey, with assets of $35.8 billion, loans of $17.7 billion and 674 branches.

"The Sabancis are one of the most highly respected and leading business families in Turkey. Akbank is an ideal partner for Citigroup; it is a premier institution in the fast growing and dynamic Turkish market," Prince said in a statement.

The deal with Citigroup is expected to close in two to three months, the banks said.

One Istanbul-based banker said the deal increased the chances of Akbank taking part in the privatization of Turkey's Halkbank, due to be sold next year in the country's biggest state banking sale.

Sources said Citigroup was close to buying Turkey's Finansbank earlier this year, but Greece's National Bank walked off with the deal.

The U.S. bank had been restricted in March 2005 by the Federal Reserve from "significant expansion" until it tightened internal controls, but that has since been lifted. Reuters