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Citi Buys Highway After Exiting Road to Ruin

Citigroup's (C) purchase of a Spanish highway operator may come as a surprise to investors expecting the struggling banking titan to scale back in the wake of a government bailout last month.

Spanish construction company Sacyr Vallehermoso said Monday it has agreed to sell its highway-operating unit, Itinere, to alternative investment unit Citi Infrastructure Investors in a deal valued at nearly 7.9 billion euros ($10 billion).

The sale involves 2.87 billion euros in cash and 5 billion euros in assumed debt. Citi will offer to buy all of Itinere's stock at 3.96 euros ($5.04) a share, the Spanish construction company said.

It will first sell Citi a 42.8% stake in Itinere, and once this is complete, another 11.6% stake, Sacyr Vallehermoso said.

Sacyr Vallehermoso has been hard hit by the collapse of Spain's real estate bubble and is eager to ease its debt load.

Citi Infrastructure Investors is focused on long-term investments in core infrastructure, largely in developed countries. The fund, less than two years old, "is seeking to establish a small number of best-in-class infrastructure platforms for growth and long-term investment, and so we are delighted to be able to announce this investment in Itinere -- undeniably a global leader in toll roads and consistent with our strategy," said Juan BĂ©jar, co-head and partner of Citi Infrastructure Investors, in a release.

But the move is somewhat curious, given Citigroup has been vocal about its strategy to pare down non-core businesses and assets. Critics' call to break up of the financial institution, either through a sale or spinoff of certain businesses, grew louder after the Treasury bailed out the big New York bank by investing an additional $20 billion through Troubled Asset Relief Program, on top of the $25 billion it had already been granted through the TARP plan.

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