y Mike Spector And Christina Rexrode 

Lender Springleaf Holdings Inc. said Tuesday that it has agreed to buy Citigroup Inc.'s OneMain Financial for about $4.25 billion, a purchase that would create a U.S. subprime giant.

The combined Springleaf-OneMain lender would have approximately 2.5 million customers and 2,000 branches, making it the biggest subprime lender in the U.S. The deal, subject to regulatory approval, is expected close in the third quarter of the year.

Getting rid of the OneMain unit has long been a goal for Citigroup. In recent years, Citigroup has also jettisoned well-known names like the Smith Barney brokerage unit and life insurer Primerica as the firm tries to remake itself after the financial crisis. The slimmed-down Citigroup, still the third-largest U.S. bank by assets, has cut units to make itself less sprawling and easier to manage.

Citigroup's plans to sell OneMain date to at least 2009. But potential deals to sell the unit fell through when Citigroup didn't want to sell for too low a price or when investors grew concerned about the ability to raise funding for the deal.

OneMain's presence among lower-income borrowers is large. It has more branches in the U.S. than Citigroup's main bank--about 1,140, according to a recent filing, compared with Citigroup's roughly 850 U.S. branches. OneMain is also the largest business remaining in Citi Holdings, where Citigroup stores assets that it wants to sell.

Citigroup Chief Executive Michael Corbat has called OneMain "a terrific business," a nod to the resurgence in subprime lending and OneMain turning profitable after losing money throughout the financial crisis. But Mr. Corbat has also said that OneMain doesn't fit "the Citi model," which has veered to focus on wealthier customers.

The New York bank had also considered spinning off OneMain into its own public company if it couldn't fetch a desired price from a buyer. Sellers often prefer a straight sale to an initial public offering, even with a lower value, since it allows them to shed an asset immediately as opposed to navigating the stock market to ensure timely share sales at the right price.

One difference in a sale is that Citigroup would be out of the business completely with one transaction, compared with an IPO, which could leave Citigroup as a shareholder in the business for months or years. Such a sale, compared with an IPO, could also help Citigroup boost its capital ratios or dividends more quickly.

Citigroup is hoping to get approval from the Federal Reserve later this month to increase its dividend as part of the central bank's annual stress tests of big banks' financial health. Last year, Citigroup was the largest U.S. bank to fail the test, putting its dividend plans on hold.

Springleaf, majority-owned by private-equity firm Fortress Investment Group LLC, has been interested in OneMain for years, dating to at least 2011. Other private-equity firms also looked at OneMain, but Springleaf quickly became the front-runner.

Citigroup has been sprucing up OneMain for a potential sale, tightening underwriting standards and getting OneMain to raise funding by selling securities backed by its own loans.

Chelsey Dulaney contributed to this article.

Write to Mike Spector at mike.spector@wsj.com and Christina Rexrode at christina.rexrode@wsj.com

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