GE sells fleet businesses for $6.9 billion

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The Financial Times / June 29, 2015

General Electric made further progress in its withdrawal from financial services with deals to sell its fleet arm, taking it about a third of the way through its planned disposal programme.

The US conglomerate sold its fleet businesses, which provide commercial vehicle financing and fleet management services, in the US, Mexico, Australia and New Zealand to Toronto-based Element Financial, for $6.9bn.

Separately, it has also signed a memorandum of understanding for the potential sale of its European fleet businesses to Arval, a subsidiary of French bank BNP Paribas, for an undisclosed amount.

The two sales will mean GE is disposing of businesses with “ending net investment” — the company’s measure of assets — of $8.6bn, and taking to about $63bn the value of the various deals it has agreed since the planned exit from financial services was announced in April. It plans to sell $200bn of assets in total.

Keith Sherin, GE Capital’s chief executive, said the company was “on track” to reach a total of $100bn in assets sold by the end of the year.

He added that GE expected “to be substantially done” with the disposal programme by the end of 2016.

Two businesses that have been set as priorities for sale in the near future are healthcare finance and European acquisition finance, which Mr Sherin has said will benefit from a quick resolution of the uncertainty about their future ownership.

Other business that are expected to be sold this year include GE’s US and global commercial lending operations and its international consumer business.

Jeff Immelt, GE’s chief executive, has set a strategy of focusing on the group’s industrial manufacturing and service businesses, which are less volatile and generally more highly valued by investors. Once the disposal programme is complete, GE Capital, the financial services division that two years ago provided almost half of the group’s earnings, is expected to generate just 10 per cent of its profits.

Deals announced already include the sales of a property portfolio for more than $26.5bn, Australian and New Zealand consumer finance businesses for $6.2bn, and US buyout lending operations for $12bn.

In total the disclosed sale proceeds have now reached $51.6bn, although there are also a few deals for which the price has not been announced.

One measure used by the company is the value of cash released from GE Capital to be paid to the parent group, which, with the fleet deals, has reached $9.3bn, a bit more than a quarter of the way to the target of $35bn.