Värde, KKR, Deutsche Buy GE Australia Finance UnitMichael Heath
General Electric Co. is selling its Australia and New Zealand financial services unit to an investor group that includes Värde Partners and KKR & Co., furthering its push to focus on industrial businesses and pare risks.
Värde Partners, KKR and Deutsche Bank AG said Sunday they agreed to buy the unit at an enterprise value of A$8.2 billion ($6.3 billion) in what they called one of the region’s largest private-equity deals.The unit, which provides GE-branded credit cards and personal loans, has about A$7 billion of gross assets, people with knowledge of the matter said in December.
The transaction adds to the $7.7 billion in assets sold by GE in the past year, data compiled by Bloomberg show. Chief Executive Officer Jeffrey Immelt is shrinking the GE Capital credit business that imperiled the parent company during the 2008 financial crisis, while emphasizing the industrial units that account for about 70 percent of revenue.
“GE’s financial services business here is formidable and a lot of people were interested in it,” said Evan Lucas, a market strategist at Melbourne-based IG Ltd. “It is quite capital intensive and KKR will try to drive efficiency to derive value. They’d also be hoping the lower interest rate environment will boost credit demand.”
Apollo Global Management LLC, TPG Capital and Macquarie Group Ltd. also submitted final bids for the business, people familiar with the matter said March 12. The Reserve Bank of Australia has dropped its benchmark cash rate to a record low of 2.25 percent and traders are pricing in about two more cuts in the cash rate in the next 12 months, according to a Credit Suisse Group AG index based on swaps.
GE said it will keep providing credit to customers in businesses such as oil and gas, energy, heath care and aviation.
In July, Fairfield, Connecticut-based GE sold a stake in its North American consumer-lending business Synchrony Financial in an initial public offering that valued the unit at $19 billion. It also spun off a majority holding in its Swiss consumer finance company Cembra Money Bank AG in October. Spain’s Banco Santander SA agreed in June to buy GE’s consumer finance unit in Sweden, Denmark and Norway for 700 million euros (then-$872 million).
“GE has a strong platform for growth in our industrial businesses in Australia and New Zealand,” said Geoff Culbert, president and CEO of GE Australia & New Zealand. “This transaction allows us to focus on our strategy to be the world’s premier infrastructure technology company with a specialty commercial financial services business.”
The Australian unit has about 100 branches and operates store cards for Perth-based Wesfarmers Ltd.’s Coles supermarkets and Myer Holdings Ltd.
“This partnership will provide a platform for growth in the dynamic consumer finance market,” George Hicks, co-CEO of Minneapolis-based Värde Partners, said in a statement. “It is a natural extension of our deep expertise in specialty consumer finance and a great fit for us.”
Credit Suisse and Morgan Stanley were GE’s advisers. Advisers to the acquiring consortium are Bank of America Merrill Lynch, Moelis & Co. and Citigroup Inc.
“We are delighted to be part of one of the largest private equity transactions ever in Australia and New Zealand,” Ali Haroon, Värde Partners’ lead partner in the Asia Pacific Region, said in the statement. “This investment demonstrates Värde’s continued commitment to our Asia-Pacific business.”