GE Capital healthcare unit goes to Capital One

The Virginia-based lender will acquire GE Capital Healthcare Financial Services for $9 billion including $8.5 billion worth of healthcare-related loans.

US lender Capital One will acquire GE’s US healthcare lending unit, Healthcare Financial Services (HFS), for $9bn. The sale includes $8.5bn worth of healthcare loans originated by HFS, the firms announced.

The sale price represents a 6 percent premium to par value of all receivables as of 30 June 2015, according to the statement. The deal is expected to close in the final quarter of this year.

Darren Alcus, current president of HFS will remain in his role as the rest of management team will also be absorbed by Capital One.

“This is a strategic investment in a specialty industry segment that we have been building out for the past several years. This addition will catapult us to a leading market position in providing financial services to the healthcare sector,” Michael Slocum, president of Capital One's Commercial Bank said. 

For Capital One, the acquisition will provide a platform for future growth, the firm said. The firm added that the purchase will not dilute its planned second quarter dividend. 

GE will sell approximately $600 million of HFS real estate equity investments to another buyer, the firm said in the statement.
GE Capital is retaining its healthcare equipment financing vertical which provides capital to GE Healthcare customers and others, the firm clarified. It is one of a number of financing verticals tied to the GE’s industrial business lines that the US conglomerate will not include in its sell off of GE Capital.

“We are on track to reduce our ending net investment by $100 billion by the end of 2015 and expect to be substantially done with our exit strategy by the end of 2016,” Keith Sherin, GE Capital chairman and CEO said in the announcement. The sale of roughly $100 billion of GE Capital assets and business lines was announced in April this year.

The other bidders for the GE’s healthcare finance portfolio were Ares Management, Apollo Global Management, according to media reports. Apart from the healthcare finance, the Connecticut-based company is selling several lending businesses with about $200 billion in assets, including the international buyout lending arm, as a part of the firm’s efforts to exit the financial services business to focus on manufacturing.

Credit Suisse and Wells Fargo Securities acted as financial advisors to Capital One while Wachtell, Lipton, Rosen & Katz provided the legal advice. Citigroup Global Markets and JPMorgan were financial advisors to GE Capital and Hogan Lovells provided legal advice.

GE Capital announced an agreement to sell its European sponsor finance unit to Japanese lender, SMBC at the end of June. The firm had executed $68 billion in GE Capital asset sales at that point, the firm said.