Sandy Weill - The Real Deal: My Life in Business and Philanthropy

From the initial public offering of Commercial Credit in 1986 to the date of my retirement as CEO in October 2003, Citigroup's share price grew 2,644 percent. In contrast, over the same period, Berkshire Hathaway appreciated 2,583 percent; AIG advanced 1,081 percent; and GE rose 813 percent. The performance of all of these companies far exceeded that of the S&P 500 Index, which grew 331 percent over the period, but Citigroup outshone them all.

This Wall Street Journal article ran on August 15, 1984.

Charles Schwab continued to oppose management but was considered an insider.

The issuance of new shares to purchase Primerica explains why the company's earnings per share grew by "only" a 20 percent compound rate during 1986-90.

American Express's stock also traded higher on the news, rising nearly5 percent the day the news broke. Evidently, investors were happy that the company was finally addressing its issues and getting back to its core strengths now that Jim Robinson and Peter Cohen were both no longer with the company.

Oddly, as lawyers drafted the merger proxy statement two months later, Citicorp's general counsel tried to write into the document that John and I planned to jointly retire after three years. Chuck Prince and Ken Bialkin replied that that was not our agreement, and the matter died. I assumed at the time that the issue represented a miscommunication between John and his legal counsel. Later, John began telling people soon after the dealto my consternationthat we had agreed to leave at the same time.

I decided against closing our nondomestic arbitrage activities at thattime since it would have been too much to execute in a short time and since our business outside the United States seemed more resilient to competitive pressures.

John's dismissive attitude became particularly ironic when he was asked,a few years later, to lead reforms at the exchange.

The formal apology was issued in April 2003 upon the finalization of the regulatory settlement and included me saying, "Certain of our activities did not reflect the way we believe business should be done. That should never have been the case, and I am sorry for that." In the statement, I also pledged that all senior Citigroup executivesincluding myselfwould not communicate with our analysts about the companies under theirresearch coverage.

Citigroup subsequently discussed a merger with Deutsche Bank in early 2004 after my retirement as CEO. Following two days of talks in Armonk, our companies agreed that it would be worthwhile to meet again once Ackermann had consulted with his supervisory board. However, news of the talks subsequently leaked and Ackermann felt compelled to back off.

Copyright 2006 by Sanford I. Weill

All rights reserved.

Warner Business Books

Hachette Book Group,

237 Park Avenue,

New York, NY 10017

Visit our Website at www.HachetteBookGroup.com.

The Warner Books name and logo are trademarks of Hachette Book Group, Inc.

First eBook Edition: October 2006

ISBN: 978-0-7595-6914-0

To Joanie

our fifty-one years together have been quite a trip.
Without you there never would have been a book.
I look forward to many more chapters together.

To Arthur Zankel

you are a great friend and were always there to help.
You are never far away and always in my thoughts.

__________________________________________________

I first saw Sandy Weill on a momentous day in April 1998 when I worked as the lead financial services analyst for Merrill Lynch. Led by Weill, Travelers Corporation had just announced its $150 billion mega-merger with Citicorp. The deal represented the biggest combination in U.S. corporate history at that time and promised to create a global powerhouse with an unparalleled array of products and distribution. According to the buzz, Sandy Weill had dreamed up the deal, and I felt awed that one person could have conceived of something so bold and have had the guts to reshape an entire industry overnight.

Attending the historic meeting for analysts and investors where Weill and his new partner from Citicorp, John Reed, would explain the merger, I observed with interest the scene unfolding around me in the large auditorium. There were throngs of cameras in the back of the room. Small groups of journalists, investors, and analysts spoke excitedly in the aisles among themselves. Periodically, some of the attendees would interact with management representatives who surely were out in the crowd to talk up the merger. I had attended plenty of merger announcements, but none rivaled the drama and sense of importance evoked by the new Citigroup.

Finally, the lights dimmed and, out from the shadows, Sandy Weill and John Reed appeared entering stage left and taking seats beside one another at a rectangular table. I looked closely at Sandy Weill, who all at once seemed shorter of stature and more rotund, but also friendlier, than I had expected. The reality didnt exactly fit his reputation as a shrewd builder of companies and steward of shareholder value. Here was a man whose press clippings could fill a small library, yet Weill exuded an overwhelming youthfulness as he gushed about the merits of his merger coup. All the while, I kept thinking that before me was a man who had incredible longevity in an industry famous for eating its young. I wanted to know more. I wanted to have the chance to engage him and figure out what made him tick. I wanted to decide for myself whether Weill was really as good as his myriad of admirers in the investment community had argued over the years.

A month later, I met Sandy in person for the first time. The venue was a lunch hosted by Merrill Lynch at the Metropolitan Club in Chicagos Sears Tower. The meeting had been arranged months earlier by my research colleague who had covered Travelers before the merger. Wall Street analysts frequently arranged sessions like this one as a means of taking care of their best investor clients. A meeting with a top CEO typically could influence millions of dollars in trading-related income to the sponsoring firm.

The intimate group of investors eagerly awaited Sandys arrival, and I remember the group parting deferentially when Weill strode into the room. There was plenty of adulation in the air even as I thought to myself cynically that no one can be that good and that the reputation was probably more myth than reality. For me, a healthy skepticism was something taught to me at an early age and a quality I always had sought to protect in my work as an analyst.

Yet all cynicism aside, I, too, was excited to meet Sandy in this more personal setting and see for myself whether he was as impressive as so many others had claimed. After his trademark thrust of the hand and declaration Hi, Im Sandy Weill, we chatted briefly about the merger, my plans to follow Citigroups stock, and my eagerness to set up a private meeting. We then sat down, and the presentation commenced. Sandy was relaxed and spoke off the cuff in a surprisingly broad manner before turning the microphone over to his chief financial officer to fill in the details. I was struck by Sandys informality and focus on the big picture. Id learn only later that he loathed making formal presentations and usually left it to his lieutenants to communicate financial details.

I worked hard that spring to get to know Weill, his management team, and the Citigroup behemoth. In July, I published an extensive report on the new company entitled A New Model for the Millennium and had the distinction to be the first analyst out of the gate with a detailed analysis. The report carefully weighed Citigroups pluses and minuses. I mused about the challenge of managing such a large company, the chance for culture clashes between investment and commercial bankers, and the need to integrate risk controls. Nevertheless, the huge opportunities for cost efficiencies and new revenues steered me to a positive overall conclusion. When the report hit their desks, most of my clients applauded my new buy recommendation.