Tags: ge | sponsor | financial | canada pension

GE to Sell Sponsor Finance to Canada Pension for $12 Billion

Tuesday, 09 Jun 2015 08:51 AM

General Electric Co. agreed to sell the majority of its U.S. private-equity lending business to Canada Pension Plan Investment Board for about $12 billion, a significant step in its plan to pull back from financial operations and return to its manufacturing roots.

Canada Pension will acquire about $11 billion of assets, chiefly the GE Antares unit, which will operate as a standalone business, GE said in a statement. The unit, which helps buyout firms line up takeover financing, will continue to be led by managing partners David Brackett and John Martin, GE said.

The agreement marks the first sale of a major business since GE announced plans April 10 to unload about $200 billion of GE Capital assets. Chief Executive Officer Jeffrey Immelt is accelerating the exit of the banking businesses that imperiled the Fairfield, Connecticut-based parent company during the financial crisis.

“This announcement is the next step in GE’s transformation to a more focused industrial company,” Keith Sherin, GE Capital’s chief executive officer, said in a statement.

The acquisition is the largest in Canada Pension’s 18-year history. It previously bought British water supplier AWG in 2006 in partnership with the Commonwealth Bank of Australia for about $10.4 billion.

Swift Sale

GE had sought a swift sale of the so-called sponsor-finance unit to avert any staff defections in a drawn-out divestiture. The company has offered retention bonuses to some employees and put restrictions on the ability of bidders to hire GE’s bankers. The European portion of the business is being sold separately.

Apollo Global Management, Ares Management LP and Guggenheim Securities also made bids for the U.S. sponsor unit, people with knowledge of the matter said last month. Ares is pursuing a deal for the $8 billion Senior Secured Loan Program it co-manages with GE, people said this week. The firm has lined up investors to help it make an acquisition, one person said.

GE said Tuesday it would continue to operate Senior Secured to give Ares and Canada Pension time to arrange an deal to continue the program. If an agreement cannot be reached, it will be wound down, GE said.

With heavy interest from prospective buyers, the disposal of GE Capital assets is going faster than anticipated, Immelt said in a May 20 presentation. The company could announce as much as $30 billion of sales by the end of June.

Other Units

GE has begun a separate sale process for most of its $74 billion U.S. commercial loan and leasing unit, people familiar with the plan said last month. The company has hired banks to find buyers for divisions including railcar leasing, vendor finance and commercial lending operations, the people said.

Immelt has been moving GE away from lending since GE Capital put the parent company at risk during the 2008-09 financial crisis. The move accelerated with the April 10 agreement to sell most of GE’s real estate to Blackstone Group LP and Wells Fargo & Co. for $23 billion.

GE engaged J.P. Morgan Securities LLC and Citigroup Global Markets Inc. for financial advice on the sponsor unit sale and Sidley Austin LLP provided legal advice. GE expects to close the deal in the third quarter.

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General Electric Co. agreed to sell the majority of its U.S. private-equity lending business to Canada Pension Plan Investment Board for about $12 billion, a significant step in its plan to pull back from financial operations and return to its manufacturing roots. Canada...
ge, sponsor, financial, canada pension
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2015-51-09
Tuesday, 09 Jun 2015 08:51 AM
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