In the three months since GE said it would sell the bulk of its banking business and focus on growing its industrial core, the company has announced deals to sell assets of GE Capital valued at $68 billion.
The total includes today’s agreement to the terms to sell its European Sponsor Finance business, a leading provider of European mid-market and private equity-backed transactions, in a deal valued at $2.2 billion. GE Capital said it was well on its way to sell assets valued at $100 billion by the end of the year.
This week alone, GE Capital announced two deals – today’s transaction as well as the sale of its global Fleet operation, which provides commercial car and truck financing and fleet management services.
New GE Capital structure will allow businesses like GE Capital Aviation Services (GECAS) to better support GE’s industrial core. At the recent Paris Air Show, for example, GECAS announced it would add 60 next-gen Airbus A320neo planes powered by LEAP engines to its portfolio. The LEAP was developed by CFM International, a joint company between GE and France’s Snecma (Safran). It features 3D-printed parts, ceramic composites and other advanced materials. Image credits: Airbus (above) and GE Aviation (top).
GE disclosed plans to sell the majority of GE Capital assets and focus chiefly on its core industrial businesses in April. Jeff Immelt, GE chairman and CEO, said his goal was to create a simpler and more valuable industrial company.
Major milestones this year have included the sale of GE Capital Real Estate in April, and the U.S. and European Sponsor Finance and Fleet Services deals in June. Combined with previous signings to dispose of UK Home Lending mortgage portfolios and the close of the sale of GE Capital’s Hungarian Bank, the business says it is on track to reach its year-end $100 billion target.
“GE Capital continues to execute on its strategy to sell most of the assets of GE Capital, and these agreements show our businesses are of great interest to financial services firms around the world,” said Keith Sherin, GE Capital chairman and CEO. “We continue to demonstrate speed and execution on our strategy to sell most of the assets of GE Capital.”
GE Capital has received over 450 inquiries for its businesses since it started reducing its size. The company said that most of its U.S. franchises designated for sale are already in the market, and that it had plans to place “most of the global assets” in the marketplace officially around the end of the third quarter or early in the fourth quarter.
GE Capital also recently accelerated the timing for the completion of the exit. It was initially scheduled for 2017, but due to high interest in the portfolio, the the company is now looking at the end of 2016.
GE says will retain some GE Capital assets that, like GECAS, can drive growth by supporting its key industrial businesses such as aviation, healthcare and energy.
The portfolio repositioning will also give GE Capital the opportunity to apply for “de-designation” as a Systemically Important Financial Institution (SIFI) in 2016.
GE says that by 2017, GE Capital’s ending net investment (ENI) will amount to approximately $90 billion, allowing the company’s industrial businesses to account for 90 percent of the company’s earnings.
GE estimates the transition has the potential to return more than $90 billion to investors in dividends, buyback and the Synchrony (a 2014 IPO) exchange through 2018.