Bank of Montreal, Canada’s fourth-largest lender, agreed to buy General Electric Co.’s transportation finance business in the U.S. and Canada.
The unit had net earning assets of about C$11.5 billion ($8.7 billion) as of June 30, the Toronto-based bank said Thursday in a statement that didn’t disclose terms. The GE unit’s management team and about 600 employees will join Bank of Montreal, according to a presentation on the bank’s website.
Bank of Montreal’s agreement is the latest in a U.S. expansion that began in 1984 with its purchase of Chicago-based Harris Bank. The lender’s last major U.S. deal was its July 2011 takeover of Milwaukee-based Marshall & Ilsley Corp., which doubled deposits and branches and strengthened its commercial lending focus across the U.S. Midwest.
“This acquisition builds on our position as a market leader in commercial banking in both the United States and Canada,” Bank of Montreal Chief Executive Officer William Downe, 63, said in a conference call with analysts. “The transportation finance business has many of the characteristics of other segments in which BMO has proven capability.”
Bank of Montreal is gaining the largest financier to North America’s commercial truck and trailer industry, which services manufacturers through dealers to end users, the lender said. About 83 percent of the assets are loans and 17 percent are leases, with 90 percent of the portfolio in the U.S. and the rest in Canada. The company, based in Irving, Texas, has 11 U.S. offices and four in Canada.
The price will be based “on net earning assets balance on closing, plus a premium,” according to the bank’s presentation. Assets may rise by C$1 billion by the time the deal closes, expected by the end of January, executives said on the call.
The bank said the transaction, which includes goodwill of about C$450 million, is expected to add about 3 percent to adjusted net income.
The business is the latest to be sold as GE hives off about $200 billion of lending assets in CEO Jeffrey Immelt’s retreat from financial services. Unloading the bulk of the GE Capital arm is part of his strategy to focus on the industrial operations whose products include jet engines, medical scanners and oilfield equipment.
GE has announced a stream of divestitures since April, including its U.S. buyout-lending unit to Canada’s largest pension-fund manager. In August, Fairfield, Connecticut-based GE agreed to sell its health-care finance division to Capital One Financial Corp. for about $9 billion and an online bank to Goldman Sachs Group Inc.
Credit Suisse Group AG and Goldman Sachs were financial advisers to GE and Shearman & Sterling LLP provided legal advice. Sullivan & Cromwell LLP and Osler, Hoskin & Harcourt LLP advised BMO.