Mumbai: Citigroup Inc., the largest US banking group, has agreed to acquire financial services firm Bisys Group Inc. for $1.45 billion to increase its services offerings to hedge funds and private equity firms.

Citigroup said it would keep Bisys'' fund services and alternative investment services units in its global transaction services unit, which holds securities, processes stock and bond trades, and offers cash management services.

Citigroup plans to sell Roseland, New Jersey-based Bisys'' retirement and insurance services units to private equity firm JC Flowers & Co. for about $645 million. The net cost of acquisition would thus be $800 million.

Bisys shareholders would receive $11.85 per share in cash, 3.3 per cent more than the last closing price. They would also receive a 15 cent per share dividend payable by Bisys, netting an additional $18 million.
The transaction would end Bisys'' nearly nine-month review of strategic alternatives.

Bisys employs about 5,000 people which would be divided equally among units going to Citigroup and Flowers, a Citigroup spokeswoman said.

Citigroup''s transaction services unit generates about 7 per cent of the New York-based bank''s profit and revenue.

In the first quarter, the unit reported net income of $447 million on revenue of $1.65 billion.

Citigroup last month announced plans to cut 17,000 jobs to help reduce overall spending by $4.58 billion. Many cuts will affect middle- and back-office operations.

Bisys had a difficult year with the company restating results for three years amid accounting errors. In October, it agreed to pay $66.5 million to settle a lawsuit accusing it of misleading investors about its financial health. The next month, it agreed to pay $25.1 million to settle a US Securities and Exchange Commission probe over alleged kickbacks involving mutual funds.

Citigroup''s investment bankers handled the transaction. Bear Stearns & Co. and the law firm Skadden, Arps, Slate, Meagher & Flom LLP advised Bisys.

Citigroup expects the transaction to close in the second half, and add to earnings per share after the first year.