General Electric (GE) to Sell French Consumer Lending Business to Cerberus Capital

Shares of the General Electric Company (GE) were trading up +0.20 or +0.65 percent to $30.98 per share in Thursday’s premarket after the company announced it had received a binding offer for its French consumer credit unit, GE Money Bank, and operations in the French Overseas Territories from Cerberus Capital Management, LP. General Electric stock closed at $30.78 per share, down -0.16 or -0.52 percent in Wednesday’s regular trading session.

Stock Analysis

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.

New York City based Cerberus Capital Management LP was founded in 1992 and is a privately held equity firm that specializes in distressed assets and securities, private equity, growth capital, real estate investment and leveraged buyouts. The company currently has over $31 billion under management and has advisory offices throughout the United States, Europe and Asia.

The sale of the French Consumer Credit unit by GE represents the end of a net investment of approximately $4.6 billion as of the end of this year’s first quarter. The deal excludes the sale of about $2 billion for the company’s prime mortgage portfolio, which will be sold separately. The transaction is still subject to regulatory and anti-trust approvals and customary closing conditions with a target closing date in the fourth quarter of this year.

Keith Sherin, GE Capital Chairman and Chief Executive Officer stated in this morning’s press release that, “As we continue to execute on our strategy to sell GE Capital’s businesses that aren’t linked to GE, with the remainder of these transactions primarily in Europe, we’re pleased to announce this agreement for the potential sale of GE Money Bank France and the DOMs to Cerberus. The business is well-established in consumer finance and has made a substantial contribution to GE Capital’s European operations.  Cerberus has a growing profile as a European financial services investor with MCS, a debt servicing business in France, and BAWAG P.S.K., a retail bank in Austria.”

The transaction is the latest in GE’s plan to sell approximately $200 billion in GE capital assets by December of 2016, which was announced in April of 2015. Since the announcement in April, GE has sold a total of $177 billion in assets and closed approximately $156 billion of those deals. GE Capital reiterated that it is on track to deliver approximately $35 billion in dividends to GE under the plan which is still subject to regulatory approval.

General Electric stock is on the high end of its yearly range. With the continued sale of its GE Capital businesses and the dividends the company expects from the sales, as well as GE’s aggressive buyback of its own stock, GE shares will most likely test their yearly high of $32.05. GE has spent $6.326 billion buying back its own stock in the first quarter and will most likely continue until it reaches its goal of getting down to 8 billion shares outstanding.

Other News About GE

ACEA Entrusts GE and Cefla with Its Tor di Valle District Heating Modernization Project in Rome

GE will deploy its first two 9.5 megawatt Jenbacher J920 FleXtra gas engines in southwestern Rome.

GE Remains Poised for Long-Term Growth with Digital Focus

Company’s restructuring will result in a leaner, simpler, more profitable firm.

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Published on Jun 23, 2016
By Jay Hawk
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.

Copyrighted 2016. Content published with author's permission.

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