Citigroup Inc said on Wednesday it will outsource the core processing elements of a U.S. receivables management business to First Data Corp, saving money and reducing about 500 jobs.

First Data said it plans to offer jobs to all of Citigroup's employees in the unit, which provides what are commonly known as lockbox services. It will also sublease Citigroup's lockbox processing facilities.

Terms were not disclosed, but the transaction will allow Citigroup to reduce spending on technology and payroll.

It is the latest of a series of transactions by New York-based Citigroup to cut costs as the struggling bank prepares to give the government a possible 34 percent equity stake, following a series of federal bailouts.

The lockbox operations are part of Citigroup's global transaction services business. Those operations are part of Citicorp, which includes several business lines that Citigroup plans to keep, rather than Citi Holdings, which includes underperforming or troubled assets it wants to shed.

First Data is based in Denver, and owned by private equity firm Kohlberg Kravis Roberts & Co.

(Reporting by Jonathan Stempel; Editing by Richard Chang)