US conglomerate General Electric (GE) has reached a deal to sell its GE Capital Australian and New Zealand commercial lending and leasing portfolios to Sankaty Advisors, an affiliate of US private equity group Bain Capital.
GE said terms of the deal weren't being disclosed, but the deal includes about US$1.7 billion in "ending net investment." Bain Capital was advised and partially financed by Deutsche Bank. The deal is expected to close during the fourth quarter, with The Australian Financial Review reporting it's valued at A$1.9 billion including debt.
The deal completes the dismemberment of New Zealand's biggest finance company. The sale of consumer finance company, GE Money, to a consortium comprising of global investors Värde Partners, private equity group KKR, and Deutsche Bank was announced in an A$8.2 billion deal in March. And in a deal recently approved by the Overseas Investment Office, Canada's Element Financial Corporation bought Custom Fleet NZ from GE Capital for $590 million.
"During the past eight months, GE Capital has signed agreements to sell four Australia and New Zealand consumer and commercial financing businesses, including today’s transaction. All transactions are expected to close by the end of the first quarter of 2016, subject to customary regulatory and closing conditions," said Keith Sherin, GE Capital's chairman and CEO.
“Combined, these transactions total about US$9 billion of ending net investment, and when closed, will complete the sale of all of GE Capital’s businesses in Australia and New Zealand,” said Sherin.
The consumer finance business comprised about 60% of GE Capital NZ, with the commercial business accounting for the remaining 40%. GE Capital's commercial operations include distribution finance, equipment finance for the likes of the forestry, construction and transport industries, and vehicle fleet manager Custom Fleet. Although the have operated under the GE Capital brand in NZ in recent times, legally GE's NZ operations have included GE Finance and Insurance, Custom Fleet NZ, GE Commercial Finance NZ, and GE Commercial Finance (USD) NZ.
According to this year's Financial Institutions Performance Survey from KPMG, GE Finance and Insurance - including about $1 billion from Custom Fleet, had total assets of $2.67 billion, GE Commercial Finance NZ had about $134 million, and GE Commercial Finance (USD) NZ about $17.5 million. ANZ's UDC, NZ's next biggest finance company, had total assets of about $2.3 billion.
In the commercial finance market GE Capital competes with UDC, BNZ, ASB and Westpac plus other finance companies. In 2011 GE Capital bought more than $100 million of commercial loans from South Canterbury Finance subsidiary and specialist plant and equipment lender Face Finance.
GE says it wants to create a simpler, more valuable company by reducing the size of its financial businesses through the sale of most GE Capital assets and by focusing on investment and growth in its industrial businesses. GE plans to retain financing businesses that relate directly to its industrial businesses.
“We continue to make strong progress in our efforts to reduce the size of GE Capital. To date, we have signed agreements to sell approximately US$128 billion of GE Capital, more than 60% of our overall plan," said Sherin.
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