GE Nears $20 Billion Asset-Sale Target on Element Fleet DealRichard Clough
General Electric Co.’s deals to sell the bulk of its vehicle fleet-management business push the company near a goal of unloading at least $20 billion of finance assets before the quarter ends.
Canada’s Element Financial Corp. will acquire GE Capital’s fleet assets in the U.S., Mexico, Australia and New Zealand for $6.9 billion. GE also said Monday that it signed a provisional accord with Arval, a subsidiary of BNP Paribas, to sell the European portions of the leasing operations.
The agreements represent about $8.6 billion in assets, excluding cash and some liabilities, and come less than a month after GE sold its $11 billion U.S. private-equity lending business to Canada Pension Plan Investment Board. GE executives said last month they expect to announce $20 billion to $30 billion of asset sales before the end of June.
“The pace of the divestitures is going well,” Jim Corridore, a Standard & Poor’s Capital IQ analyst, said in a note to clients. He rates GE as buy.
GE Capital has said its top sale priorities are unloading units that finance health-care businesses and foreign buyouts. The company has received bids for the health-care division from Capital One Financial Corp., Apollo Global Management, Ares Management LP and Ventas Inc., people familiar with the matter said last week.
GE fell 1.7 percent to $26.64 at the close in New York amid a global selloff in equities triggered by the Greek financial crisis. Element rose 1.7 percent to C$19.19 in Toronto.
GE plans to shed about $200 billion of lending assets to refocus on industrial operations after GE Capital’s struggles during the 2008 financial crisis imperiled the parent company. Fairfield, Connecticut-based GE will retain divisions that support manufacturing -- including aircraft leasing, a boost for jet-engine production -- while unloading the fleet unit and similar businesses.
GE Capital has announced about $63 billion in sales to date. The company remains “on track” to sell about $100 billion of assets by the end of the year and be mostly done in 2016, GE Capital Chief Executive Officer Keith Sherin said Monday in a statement.
“We continue to demonstrate speed and execution on our strategy to sell most of the assets of GE Capital,” Sherin said. “This announcement is the next step in GE’s transformation to a more focused industrial company.”
GE Capital Fleet Services leases and manages more than 1.5 million autos and trucks, mostly in the U.S., for mid-sized and large companies including Hewlett-Packard Co. The assets in Japan weren’t included in the deals with Element and Arval.
The fleet business will complement Element’s growing vehicle division, located mostly in North America. The Toronto-based company bought GE Capital’s Canadian fleet business in 2013 and created a Canadian-U.S. partnership. In 2014, Element expanded further by purchasing the North American fleet management business of PHH Corp., PHH Arval.
The GE transaction is Element’s largest and accelerates growth plans as the company continues to look for more deals, executives said on a conference call Monday.
The U.S. and Mexico portion of the deal is expected to close in the third quarter, and the Australia and New Zealand part in the fourth quarter, GE said.
JPMorgan Chase & Co. advised GE on the transaction, with legal services provided by Weil, Gotshal & Manges LLP. Bank of Montreal, Barclays Plc, INFOR Financial Inc. and Canadian Imperial Bank of Commerce served as financial advisers to Element, while Blake, Cassels & Graydon LLP and Cravath, Swaine & Moore LLP acted as legal counsel.