GE has reached an agreement to sell its GE Capital's global Commercial Distribution Finance (CDF), North American Vendor Finance and Corporate Finance platforms to Wells Fargo and Company.
The sale of the business units includes ending net investment (ENI) of approximately US $30 billion (about US $32 billion of assets) and approximately 3,000 employees. It is expected to be completed in the first quarter of 2016. Other terms of the transaction were not disclosed.â€¨â€¨"This is our largest transaction to date and a critical step in our efforts to reduce the size of GE Capital,' said Keith Sherin, GE Capital Chairman and CEO. "Since our April 10 announcement, we've signed more than US $126 billion in transactions, which is over 60 percent of our overall plan, and are on track to become less than 10 percent of GE's earnings as the company transitions to a more focused digital industrial company.'
Wells Fargo believes CDF's inventory finance products and customer relationships will complement its existing asset-based lending product offerings through its Wells Fargo's Capital Finance division.
"This acquisition is an outstanding opportunity for Wells Fargo to deepen relationships and strengthen our presence in key commercial lending markets,' says Tim Sloan, head of Wells Fargo Wholesale Banking. "GE Capital's businesses are industry leaders with proven business models and capabilities backed by exceptionally talented and experienced teams. These advantages, in addition to portfolios that are diversified geographically and by industry, will allow Wells Fargo to continue to grow our business in order to better serve the needs of new and existing Wholesale Banking customers.'
Many Canadian boat dealers and manufacturers receive their lending through GE Capital CDF, and have been anticipating the sale since GE first announced its plans to sell its Capital finance business back in early April. They are among CDF's customers in 60 countries who receive customized inventory financing to fund the flow of finished goods. The business operates globally in six core industries: marine, recreational vehicles, motorsports, outdoor products, technology, electronics and appliances. CDF has US $13 billion in assets serving approximately 2,000 original equipment manufacturers and 40,000 dealers around the world.
"We're very pleased to sell this significant piece of our business to Wells Fargo, a respected industry leader who is committed to helping our customers grow and succeed,' adds Sherin. "Wells Fargo's strong operations, risk and regulatory expertise, combined with their customer focus, will allow them to seamlessly integrate our businesses.'
Vendor Finance is a leading provider of private label and co-branded programs for OEMs, dealers and end users across four core industries in Canada and the US: office imaging, construction, material handling and technology.
The transaction also includes essentially all of GE Capital Corporate Finance's portfolio of senior secured loans and leases for middle market companies across Canada and the US, as well as some employees. Corporate Finance has 10 specialized equipment lending and leasing verticals, with particular expertise in food and beverage, forestry, metals, restructuring and retail.
When completed, the transaction will contribute approximately US $4.2 billion of capital to the overall target of approximately US $35 billion of dividends expected to be paid to GE under the disposition plan. With this transaction, the total ENI for 2015 announced sales is more than $126 billion.
"We continue to execute quickly on our asset sales. With this transaction, GE Capital has only one significant platform remaining for sale in the US, our Franchise Finance unit with US $5.5 billion of ENI. Once the US transactions have closed and the split off of GE Capital's retail finance business, Synchrony Financial, has occurred, GE Capital expects to file an application in 2016 for de-designation as a Systemically Important Financial Institution as its footprint in the US will be significantly reduced. Globally, GE Capital expects to be substantially done with its exit strategy by the end of 2016,' says Sherin.
GE is embarking on a strategy to create a simpler company by reducing the size of its financial businesses through the sale of most GE Capital assets and by focusing on its industrial businesses. GE will retain the financing businesses that relate directly to GE's industrial businesses.