Babcock Brown owns about 8 percent in the fund

In a bid to raise capital and restructure the business, thegroup is trying to sell more than half its asset base,including real estate, leasing and corporate and structuredfinance businesses, to focus on infrastructure investments. On Monday, one of its funds under management, Babcock &Brown Power BBP.AX said it had signed an agreement to sellsome of its assets to Aurora Energy (Tamar Valley) Pty Ltd,generating about A$15 million. Another of its managed funds, Babcock & BrownInfrastructure Group BBI.AX (BBI) said it would considerselling PD Ports Plc, the operator of Britain's third-largestcontainer dock. A BBI spokeswoman said it would not be looking to sell atan auction, but would consider a sale if the price was right.Babcock & Brown owns about 8 percent in the fund. At 0254 GMT shares in Babcock & Brown Power were down 1percent at A$0.10, while shares in Babcock & BrownInfrastructure tumbled 7.7 percent to A$0.12 The benckmarkS&P/ASX 200 .AXJO was 1.53 percent lower.

The bank syndicate involves 26 lenders, includingAustralian majors Westpac Banking Corp (WBC.AX), CommonwealthBank of Australia (CBA.AX) and New Zealand Banking Group(ANZ.AX). ($11.42 Australian Dollar) (Reporting by Mette Fraende; Editing by James Thornhill & KimCoghill). (Recasts lead, adds deal details; paragraphs 10 to end) Stocks Mergers & Acquisitions Funds News ETFs News By Megan Davies and Dan Wilchins NEW YORK, Jan 11 (Reuters) - Citigroup Inc (C.N) was closerto a deal on Sunday to join its Smith Barney business withMorgan Stanley's brokerage operation (MS.N) in a move thatwould create the world's largest retail brokerage. The creation of the joint venture deal would lead to MorganStanley making a cash payment to Citi of about $2.5-$3 billion,a source familiar with the situation said. The deal will also lead to Citi revaluing the unit as partof the bigger venture rather than a stand-alone business,leading to a gain of $5-$6 billion post-tax in tangible commonequity, said the source, who asked not to be identified becausethe talks aren't public. The cash would be a big boon for Citi, which is undertremendous pressure from the U.S. government to shore up itsbalance sheet after taking $45 billion of government capital inOctober and November.

Under the deal being discussed, Morgan Stanley would take a51 percent stake in the venture and would also have options toincrease that amount at a period of 3-6 years in the future,the source said. A deal could be announced this week but is unlikely to comeas soon as Monday, the source said A second source said anannouncement was expected this week. The new business would have a combined estimated value of$16 billion to $20 billion, the first source said. It would have more than 23,000 financial advisers beforeattrition, ranking as the world's largest retail brokerage,surpassing rivals Bank of America Corp (BAC.N) and Wells Fargo& Co (WFC.N).

The deal also allows Citi to enjoy a share of the venture'searnings. The new joint venture could extract cost savings fromconsolidating real estate and trade processing platforms. The combined business would likely have Morgan StanleyCo-President James Gorman as chairman, and Citigroup GlobalWealth Management President Charles Johnston as its chiefexecutive, a source previously told Reuters. That couldstrengthen Gorman's position in any future discussions over apossible successor to Morgan Stanley CEO John Mack. A source previously told Reuters that Citi had alsodiscussed internally the possibility of selling its BanamexMexican banking unit.