GE Nears U.S. Finance Exit With Asset Sales at $126 Billion

  • Next up: finish divestiture of lending assets outside U.S.
  • GE Capital sees disposals `substantially done' by end of 2016
Photographer: Simon Dawson/Bloomberg

General Electric Co. is shifting its focus overseas after exiting almost all U.S. finance operations in a sweeping plan to return to its manufacturing roots.

With an agreement Tuesday to sell $32 billion in GE Capital assets to Wells Fargo & Co., this year’s divestitures now exceed $126 billion, GE said. The company will now try to unload about $60 billion of international assets, including large operations in France, Japan and Italy.

“This is our largest transaction to date and a critical step in our efforts to reduce the size of GE Capital,” Keith Sherin, the unit’s chief executive officer, said in a statement announcing the Wells Fargo deal. “Globally, GE Capital expects to be substantially done with its exit strategy by the end of 2016.”

After years of lagging behind benchmark U.S. stock indexes, GE announced a plan in April to sell the bulk of its lending operations, a business once so large that it almost capsized the parent company during the financial crisis. By shedding most of GE Capital, as well as consumer units such as the appliances division, CEO Jeffrey Immelt has re-emphasized industrial products spanning jet engines, oilfield equipment and locomotives.

Peltz’s Investment

The effort gained additional urgency after Nelson Peltz’s activist investment firm Trian Fund Management LP disclosed a $2.5 billion stake in Fairfield, Connecticut-based GE this month. While supporting the pullback from GE Capital, Trian said it wants to see Immelt follow through on the plan and other efforts to boost margins.

GE’s only significant U.S. platform left to sell is a franchise finance business with about $5.5 billion of assets, Sherin said. After closing the U.S. deals and completing a split-off of the North American retail finance operations now known as Synchrony Financial, GE plans to apply to drop its U.S. government designation as a systemically important financial institution.

“The SIFI de-designation is kind of the official capping of their challenged -- some might call precarious -- journey through the global recession and meltdown of GE Capital,” said Nicholas Heymann, a William Blair & Co. analyst who upgraded GE to outperform from market perform this week. “It’s a big deal because it gives them a lot more flexibility with regard to what they might want to do.”

Shares Rise

GE rose 0.4 percent to $28.21 at 10:40 a.m. in New York. The shares advanced 11 percent this year through Monday, beating the 4.8 percent decline for the Standard & Poor’s 500 Industrials Index.

The Wells Fargo deal, projected to close in early 2016, includes GE Capital’s commercial distribution finance, vendor finance and corporate finance units, as well as about 3,000 employees. Toronto-Dominion Bank also bid for the businesses, while KKR & Co. and Apollo Global Management LLC sought portions of the assets, people familiar with the matter said in August.

Wells Fargo previously agreed to buy commercial real estate assets and GE’s railcar-leasing division.

GE plans to retain some lending units that support its manufacturing operations, including the GE Capital aircraft lessor known as Gecas. GE is scheduled to report third-quarter earnings on Friday.

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