General Electric Co. agreed to sell its $2.2 billion European buyout-lending unit to Sumitomo Mitsui Banking Corp., pushing the U.S. company’s asset disposals to $23 billion since it began a sweeping overhaul of its finance arm.
The deal to shed the so-called European Sponsor Finance division, which lines up funding for private equity firms, comes a day after GE unloaded the bulk of its vehicle fleet-management business to Canada’s Element Financial Corp. for $6.9 billion. The agreements accelerate the plan to divest most of GE Capital as the parent company refocuses on manufacturing units making heavy-duty products such as gas turbines, jet engines and medical scanners.
“We’ve had tremendous interest in our businesses and assets,” GE Capital Chief Executive Officer Keith Sherin said Tuesday in a statement. “We continue to execute with speed, certainty and value as we work to transform GE to a more focused industrial company.”
GE said it expects to close the European sponsor sale in the third quarter. The Fairfield, Connecticut-based company will retain its $1 billion investment in the European Senior Secured Loan Programme and European Loan Programme, both joint ventures between affiliates of GE Capital and Ares Capital.
GE rose 0.5 percent to $26.77 at 10:03 a.m. in New York. The shares gained 5.4 percent this year through Monday, compared with a 4.2 percent decline in the S&P 500 Industrials index.
Sumitomo Mitsui is among Japanese firms that are interested as GE disposes about $200 billion in finance operations. Banks in the world’s third-largest economy are looking abroad for growth as a declining population and shrinking loan margins hamper profit prospects at home.
“This is an effective way to expand overseas business,” said Yoshinobu Yamada, an analyst at Deutsche Bank AG in Tokyo, before the deal was announced. “Sumitomo Mitsui can count on the spreads from lending to private equity. Moves to purchase these types of assets will increase among other megabanks.”
Sumitomo Mitsui could be a bidder for GE’s Japanese leasing business. GE plans to seek offers for the operation, which has 500 billion yen ($4.1 billion) of assets, as soon as July, people with knowledge of the matter said in May.
The European sponsor agreement extends GE’s pullback from lending to private-equity firms after a $12 billion deal on June 9 to sell most of the U.S. business to Canada Pension Plan Investment Board. The European unit had been one of GE Capital’s top sale priorities, along with the U.S. division and the health-care lending business, Sherin said in a June 9 interview.
GE executives said last month they expected to announce $20 billion to $30 billion of asset sales before the end of June. In addition to the platform dispositions, the company sold about $1.2 billion of loans from the U.K. Home Lending portfolio. GE also closed about $15 billion in previously announced sales, including its Budapest Bank unit.
Separately, GE said an ongoing regulatory review will prevent it from closing the deal to sell its home-appliances division during the second quarter. Electrolux AB agreed in September to buy the unit for $3.3 billion.