GE Finance Unit to Sell BAC-Credomatic to Colombia's Aval for $1.9 Billion
General Electric Co.’s finance unit agreed to sell BAC-Credomatic GECF Inc. to Grupo Aval Acciones y Valores SA, Colombia’s biggest financial holding company, for $1.9 billion as it sheds assets to focus on commercial lending.
GE, owner of 75 percent of BAC-Credomatic, will buy the rest and sell the entire stake to Bogota-based Aval, the holding company said in a statement. The bank has about $10.6 billion in loan assets and deposits, with operations in Central America and Mexico, GE said in a statement.
Jeffrey Immelt, GE chief executive officer, is divesting the bank as the company aims to reduce the size of GE Capital. GE has said it wants to shrink its net investment in finance assets by the end of 2012 to $440 billion from about $516 billion at the end of the first quarter.
“Getting what might be upwards of a billion-dollar gain has got to be a good thing as long as we don’t have any hidden liabilities,” Steven Winoker, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview. He rates the company’s shares “outperform”
GE rose 5 cents to $15.25 at 4:15 p.m. in New York Stock Exchange composite trading. Grupo Aval gained 18 pesos, or 1.9 percent, to 980 pesos in Bogota.
GE Capital Chief Executive Officer Michael Neal said June 4 that possible sales by the Fairfield, Connecticut-based company include its 21 percent holding in Turkiye Garanti Bankasi AS, Turkey’s biggest listed bank, and “other things like that.”
Increased Stake
The GE Capital global banking unit bought a 49.99 percent stake in BAC-Credomatic in 2005 and increased it in January 2009 to a mandated 75 percent. At the time, BAC-Credomatic had about $7.5 billion in assets and $4.7 billion in deposits, according to a Business Wire statement.
The finance unit accounted for about half of GE’s earnings in 2007. The global financial crisis that led to the takeover of Bear Stearns Group Inc. in 2008 and the collapse of Lehman Brothers Holdings Inc. cut GE Capital’s contribution to the parent company’s profit to about 14 percent last year.
The sale of BAC, which has operations in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Mexico, is expected to close by the end of this year, GE said in the statement. BAC has about $5.1 billion in loan assets and $5.5 billion in deposits. The transaction requires regulatory approval, Grupo Aval said in a filing today.
“This is part of Grupo Aval’s strategy to reach new international markets,” said Estefania Leon, senior analyst at brokerage Correval SA in Bogota. “Though the success of the purchase can only be judged in the long term, the market is reacting positively to inorganic growth, as Aval became a much bigger entity.”
Credit Suisse served as GE’s financial adviser. Its legal adviser was Latham & Watkins.
Grupo Aval received legal advice from Davis, Polk & Wardwell, Martinez Neira Abogados, and Arias & Munoz.
To contact the reporters on this story: Will Daley in New York at wdaley2@bloomberg.net or: Andrea Jaramillo in Bogota at Ajaramillo1@bloomberg.net
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