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General Electric (GE) to Sell U.S. Private Equity Lending Division for $12B

By: , dated June 9th, 2015

Shares of the General Electric Company (GE) were trading down -0.03 or -0.11 percent to $27.21 per share in this Tuesday's premarket after the company confirmed an agreement to sell its U.S. private equity lending arm to the Canada Pension Plan Investment Board or CPPIB for $12 billion. General Electric stock closed at $27.24, down -0.05 or -0.18 percent in Monday's regular trading session.

Fairfield, Connecticut based General Electric is an American multinational conglomerate best known as a manufacturer of electrical appliances. The company, founded by Thomas Edison in 1892 has expanded into aviation, consumer electronics, oil and gas production and exploration, electric motors, locomotives, software, lighting, healthcare, energy and finance among other businesses. The company is divided into several divisions, which include Aviation, Capital, Energy Management, Healthcare, Oil and Gas, Power and Water and Transportation.

The sale of the GE Capital Sponsor Finance division, which includes the Chicago based Antares Capital arm is the latest in the company's efforts to focus on its industrial businesses by selling most of GE Capital's assets. GE and its board have decided that market conditions over the next 18 months would be a favorable time to dispose of its assets, retaining any financing "verticals" related to GE's industrial businesses.

At the deal's closing, CPPIB will retain the Antares brand and operate the business as a standalone independent entity. The division will be headed by managing partners John Martin and David Bracket that have been with Antares since its founding. GE Capital Sponsor Finance Chief Executive, Stuart Aronson will remain with GE Capital.

Keith Sherin, Chief Executive Officer and chairman of GE Capital said in the company's press release that, "We are excited to announce this agreement to sell Sponsor Finance to CPPIB, this represents an important milestone as we continue to execute on our strategy to sell most of the assets of GE Capital. The value we will achieve through this transaction is a testament to the depth of talent and expertise of the Sponsor team and our ability to execute high-value transactions quickly".

The transaction will have GE Capital continue operating its Senior Secured Loan Program or SSLP for a period of time before the closing of the deal to give CPPIB and Ares Capital the opportunity to work together. If an agreement between the two parties is not reached, GE Capital intends to retail SSLP so that it can execute unwinding the program -- $7.6 billion in GE Capital Investment with $6.1 billion attributed to Sponsor Finance -- in an orderly manner.

Sherin concluded his statement, saying, "This announcement is the next step in GE's transformation to a more focused industrial company. The sale of Sponsor Finance aligns with our strategy to pair a smaller GE Capital with GE's long-term industrial growth."

The deal, which includes a $3 billion bank loan portfolio, is subject to the customary regulatory and other approvals and should close by the third quarter of 2015. GE announced asset sales of $55 billion and expects to achieve $100 billion in sales by the end of 2015. The sale of the Sponsor Finance unit was widely anticipated and has had very little effect on the GE stock price, declining a fraction in this morning's premarket.

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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