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GE Completes the Separation of Synchrony Financial

Today GE (NYSE:GE) completed the separation of Synchrony Financial (NYSE: SYF), the largest provider of private label credit cards in the United States[1]. Synchrony Financial has been a part of GE Capital for more than 80 years, helping consumers finance purchases from clothing to jewelry to RVs to furniture.

Exchange Infographic 11.16 530pm

GE decided several years ago to reduce the size of its financial services business. Exiting its U.S. consumer finance business (now Synchrony) was a clear choice.

Tuesday capped a nearly two-year process to split off Synchrony. It’s been a no small task after 80 years of shared systems, resources, cultures to make an independent, standalone firm.

In July 2014, GE took the first major step in the process and offered 15 percent of Synchrony to the public in what was one of the year’s largest IPOs. This allowed GE to establish Synchrony as a separately traded stock and allowed Synchrony to raise capital to stand on its own.

Following the IPO, GE and Synchrony spent more than a year building the infrastructure needed to separate.

On Tuesday, GE took the last step in the separation by completing an offer to exchange shares of GE common stock for the remaining 85 percent of shares of Synchrony Financial common stock owned by GE. Under the terms of the exchange offer, shareholders who participated in the exchange, which was oversubscribed, will receive 1.0505 shares of Synchrony common stock for each share of GE common stock accepted in the exchange offer.

The successful conclusion of the exchange offer is great news for both GE and Synchrony, the company said. GE will retire more than 671 million shares through the exchange, which will reduce our outstanding float by approximately 6.6 percent – said another way, this is the equivalent of a $20.4 billion GE share buyback.

GE said that this was an efficient way to return capital to the company while also executing on its strategy to focus on its industrial core and reduce the size of its financial businesses.

GE said that this was the largest share exchange it ever done and that the huge size and scale of the transaction resulted in a massive step forward in its transformation, not to mention positive news for both GE and Synchrony Financial shareholders.

 

[1] Based on purchase volume and receivables, The Nilson Report (April 2015, Issue #1067)

 

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