Eddie Lampert to the Rescue?

Citigroup (C) is a $270 billion conglomerate that has seen its stock price languish over the past 5 years. Disgruntled shareholders haven't been able to get much done thus far and it seems the Board is giving CEO Chuck Prince all the time in the world to make a change. Many on the street think Citigroup is prime for a major restructuring and most feel that Prince is on the hot seat. Well that hot seat just got a little bit hotter.

Yesterday Eddie Lampert's ESL Investments disclosed that it has accumulated a 0.3% stake in the company worth roughly $800 million. ESL boasts an impressive investment track record and expertise in turnaround situations - just look at Lampert has done with Kmart and Sears. Investors welcomed Eddie to the party by sending Citigroup's stock up 4% today on the news. Lets take a second here to recap: ESL buys 0.3% of Citigroup and the company's market cap rises by over $10 billion. Suffice it to say the market may have overreacted a bit to news of ESL's arrival. But then again, the only time this stock has moved in the past 5 years is when there are talks of a potential restructuring.

So the question remains, what exactly are Mr. Lampert's intentions with Citigroup? In my opinion Lampert's 0.3% stake will not be enough to cause change, even with Lampert's clout and capital. Though I agree with the WsJ that the company should not take Eddie's arrival lightly. After all it is hard to imagine that Lampert would commit $800 million of his firm's capital without the intent to be actively involved. My guess is that Chuck Prince won't be around too much longer. I bet many at Citigroup are wishing they could have Jamie Dimon back . . .

Whatever the outcome to this saga the real allure for me is the great cast of characters.

1. Prince Al-Waleed is Citi's largest shareholder and also the 5th wealthiest man in the world.
2. Eddie Lampert is a billionaire and a veritable legend in the hedge fund world.
   
3. Robert Rubin is the former Secretary of the Treasury under Clinton and a colleague of Lampert at Goldman Sachs. He is also the author of In An Uncertain World, an amazing book on decision-making under conditions of uncertainty.
   
4. Sandy Weill helped build Citigroup as its CEO, retains a seat on the board and still controls a stake worth just under $1 billion.
5. Chuck Prince, the beleaguered Citigroup CEO and longtime Weill loyalist.
6. And the list goes on and on.