GE Capital’s European lending unit sold for $2.2bn

GE Capital will retain its share of its European joint ventures with Ares Management.

The European private equity financing unit of GE Capital has been sold to Sumitomo Mitsui Banking Corporation Europe Limited (SMBC) for roughly $2.2 billion, GE said in a statement.

An offer from SMBC, a wholly-owned subsidiary of Japanese bank Sumitomo Mitsui Banking Corporation, has been accepted ahead of “many indications of interest”, the firm said in a statement. Amongst other interested parties were Apollo Global Management and Ares Management, according to reports. Blackstone's credit arm, GSO Capital Partners was also interested in the European assets, PDI understands.

GE Capital will retain its $1 billion investment in the European Senior Secured Loan Programme and European Loan Programme, both joint ventures between affiliates of GE Capital and affiliates of Ares Capital, the statement said. GE Capital will be retaining its share with parent General Electric, PDI understands.

The latest agreement brings to $23 billion the amount of new deals reached since US conglomerate General Electric announced its plan to divest most of its global financing unit GE Capital. It also brings total sales signed to $68 billion.

The sale of the European unit to SMBC is expected to close in the third quarter of 2015. When completed the portfolio, which represents about $2.2 billion of economic net income (ENI), will contribute $400 million of capital to the overall target of $35 billion of dividends expected to GE under its disposal plan.

“As GE Capital continues to execute on its strategy to sell most of the assets of GE Capital, this agreement with SMBC shows our European businesses are of great interest to financial services firms around the world,” Keith Sherin, GE Capital chairman and chief executive officer, said.

GE Capital’s Budapest Bank was sold to the Hungarian state on 29 June, while the sale of GE Capital Real Estate has also closed, amounting in total to approximately $15 billion of previously announced sales, the firm said.

Other sales during the last quarter include $1.2 billion of loans in its UK Home Lending portfolio plus a previously announced $8.6 billion global Fleet Services business and the sale of its US sponsor finance business to Canadian pension fund manager CPPIB for approximately $12 billion.

In all, GE is looking to sell $100 billion by year end and the firm anticipates the disposal to be largely complete by the end of 2016.

Sherin concluded: “We’ve had tremendous interest in our businesses and assets. We continue to execute with speed, certainty and value as we work to transform GE to a more focused industrial company.”

GE announced in April that it is focusing on its core high-value industrial businesses and is selling most of its GE Capital assets. However it will retain the verticals that relate to GE’s industrial businesses.

Bank of America Merrill Lynch and Citigroup Global Markets provided financial advice to GE on the sale of its European sponsor finance unit. Clifford Chance provided legal advice.