Citadel Seeks Buyer For I-Bank, Shuts Research Unit

Aug 11 2011 | 12:52pm ET

Citadel Investment Group hopes to sell its struggling three-year-old investment banking unit, a business that has perhaps become more notable over its short life for its revolving-door management team than the customer service it promised to provide.

The $11 billion hedge fund is looking for a buyer for Citadel Securities' advisory business. It has also decided to close its equity research operation and lay off its staff, including its head, Jaine Mehring.

All other business at Citadel Securities—including market-making and sales and trading—will remain operational, according to published reports.

Other staffers will be laid off, as well—lots of them, according to Dealbreaker.com.

"Everything is over today, exit interviews being done now," a source told the Web site. "Sales and trading started getting the ax at 8:30 a.m. Research at 9 a.m. Credit and banking—part layoffs, part being sold off to another firm."

The source told Dealbreaker that Citadel Solutions' options team and some traders would join Citadel Execution Services.

Citadel denied that the situation was quite so dire. "We're laying off some employees but not shutting down the entity," it told Dealbreaker. "This continues to be an ongoing business."

The partial sale and closing of Citadel Solutions was first reported by Bloomberg News.

Citadel's Kenneth Griffin launched Citadel Solutions in 2008, calling it a "once-in-a-lifetime opportunity" created by the banking crisis of 2007 and 2008.

"I do believe in the next five years we will have created one of the great sales and trading operations," Griffin told Bloomberg in 2009.

But Citadel Solutions had trouble holding on to top staffers, many of whom reportedly clashed with Griffin. At least 10 left the firm over the past two years, including several heads of the business.

Citadel's decision to get out of the investment business follows its sale of its hedge fund administrator to Northern Trust Corp. last month. It also decided not to expand Citadel Securities into Treasuries as a market-maker last month.


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