NEW YORK (Reuters) - Citigroup Inc and the United States have reached an agreement in which the government will substantially raise its stake in the bank, but demand a boardroom shakeup, the Wall Street Journal said, citing people familiar with the matter.
Under a deal expected to be announced early Friday, the Treasury Department has agreed to convert some of its current holdings of preferred Citigroup shares into common stock, the Journal reported on its website.
The government will convert its stake only to the extent that Citigroup can persuade private investors to do so alongside the government, the people said. The Treasury will match the private investors' conversions dollar-for-dollar up to $25 billion, the Journal said.
A representative of Citigroup and a spokesman for the U.S. Treasury were not immediately available for comment.
The size of the government's new stake will hinge on the amount of preferred shares that private investors, including sovereign wealth funds, agree to convert into common stock. The Treasury's stake is expected to rise to 30 percent to 40 percent of Citigroup's shares, the Journal said.
Although, Chief Executive Vikram Pandit is expected to keep his job, the government is demanding that New York-based Citigroup overhaul its board of directors, the Journal said.
It said the Treasury will call for Citigroup's board to be comprised of a majority of independent directors.
There is still uncertainty about the price at which the government has agreed to convert its preferred shares into common stock, although people briefed on the discussion said Citigroup was asking Washington to convert at a price of as much as $5 a share, according to the Journal.
Citigroup shares closed at $2.46 on Thursday on the New York Stock Exchange.
(Reporting by Euan Rocha; Editing by Anshuman Daga)
