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Apr-17-2008GE Buys Most of CitiCapital North America Lease Unit (Update1)(topic overview)
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GE Capital will acquire seven CitiCapital equipment finance business lines, and the deal will add about $13.4 billion in assets to GE Capital's commercial finance business, according to a press release Thursday. Citigroup said the move was part of its efforts to focus on core businesses and cut costs. [1] The deal, which is expected to close in the third quarter, would add about $13.4 billion in assets to GE Capital's commercial finance business. "This deal is right down in the middle of the sweet spot for us. It's in collateral we know, it's construction, materials handling, franchise equipment, in industries we understand," said Daniel Henson, president and chief executive of GE Capital Solutions, in a phone interview. "It's basically a small version of us, we're about 10 times their size." While GE, the second-largest U.S. company by market capitalization, stunned Wall Street last week with a 20 percent decline in profit at its finance arms, the Capital Solutions business did not fair as poorly, with earnings up 1 percent. Henson noted that Fairfield, Connecticut-based GE expects the acquisition to add to earnings this year.[2]
The CitiCapital lines that GE is buying help companies finance equipment in businesses including health care, material handling and construction. The purchase is expected to add to profit this year, said Dan Henson, CEO of GE Capital Solutions. The unit's profit rose 1 percent last quarter, he said. "It's clearly a slower environment year-over-year and gives us tailwind with new customers and additional product,'' Henson said in an interview. "It's one of those deals where it's a nice asset play on future growth.''[3]
As per the recent deal, GE Capital would buy seven CitiCapital equipment finance business lines, including Healthcare Finance, Private Label Equipment Finance, Material Handling Finance, Franchise Finance, Construction Equipment Finance, Bankers Leasing, and CitiCapital Canada.[4] GE Capital, a unit of General Electric Co, would buy seven CitiCapital equipment finance business lines, ranging from healthcare finance to construction equipment finance.[5]
General Electric's GE Capital unit said Thursday that it will buy a majority stake of Citigroup's commercial lending and leasing business for an undisclosed amount of cash, as both companies seek to cope with market troubles and internal problems. The news comes as commercial lenders like CIT are battling the dramatically worsening market for credit, which has cost them billions in losses. Earlier this week, G.E. posted a surprising quarterly loss, blaming the shaky debt markets. Its chief executive, Vikram Pandit, has been under pressure to streamline a financial behemoth many analysts say is too unwieldly to manage effectively. In a statement Thursday, Citi said the sale was part of its efforts "to direct capital to core businesses."[6] NEW YORK (AP) - General Electric Co. reached a deal to buy Citigroup Inc.' s (NYSE:C) commercial lending and leasing business -- CitiCapital -- for an undisclosed price, the companies said Thursday.[7] NEW YORK, Apr. 17, 2008 (Thomson Financial delivered by Newstex) -- General Electric Co. Thursday said its capital unit would buy most of CitiCapital, Citigroup Inc.' s (NYSE:C) commercial lending and leasing unit.[8]
April 17 (Bloomberg) -- General Electric Co. agreed to buy most of Citigroup Inc.' s North American commercial lending and leasing unit, adding $13.4 billion in finance assets less than a week after an unexpected first-quarter profit decline.[3] General Electric Co. agreed to purchase much of Citigroup Inc.' s North American commercial lending and leasing business as the two financial-services giants continue to shake up their portfolios. GE, Fairfield, Conn., has been buying and selling assets, notably at its GE Money consumer-finance business, while Citi is.[9] NEW YORK/BOSTON (Reuters) - GE Capital said on Thursday it agreed to acquire most of Citigroup Inc's (C.N: Quote, Profile, Research ) North American commercial lending and leasing business for an undisclosed price, expanding its assets in a key portion of its finance operations.[2]
General Electric Co. (GE) reached an agreement to purchase most of Citigroup Inc.' s (C) commercial lending and leasing business in an all-cash deal.[1]
General Electric's GE (NYSE:GE) Capital division is buying seven lending units from Citi: healthcare, private-label equipment, material-handling, franchise, construction equipment, bankers leasing and the Canadian division.[7] GE Capital will acquire seven of CitiCapital's lending lines, including healthcare and equipment leasing but excluding tax-exempt finance. Citi sold its transportation financing line to GE Capital in 2005.[6]
In the agreement, GE (NYSE:GE) Capital will buy seven of CitiCapital's equipment finance business lines.[8]
When completed, the deal would add approximately $13.4 billion in assets to GE Capital's Commercial Finance business.[10] The company said that after the deal is complete, it will add about $13.4 billion in assets to GE Capital's commercial finance unit.[8]
The deal, which is expected to close in the third quarter, would add about $US13.4 billion in assets to GE Capital's commercial finance business.[5] The company's assets shrank by $176 billion in the fourth quarter. GE called the CitiCapital deal a'significant growth opportunity.' 'It's a business we know how to grow,' Mike Neal, chief executive of GE Commercial Finance, said in a statement.[7]
CitiCapital's Tax Exempt Finance business is not included in the transaction. Pending normal regulatory approvals, the companies expect the acquisition to close by the third quarter of this year. Commenting on the acquisition, Mike Neal, GE vice chairman, said, "This acquisition represents another significant growth opportunity for GE'one that helps us offer more to customers. It's a business we know how to grow." It is to be noted that GE acquired and successfully integrated CitiCapital's Transportation Financial Services Group in 2005.[4] The health-care finance unit will be added to the GE Healthcare Financial Services division. GE Money, the consumer unit and world's biggest private-label credit card issuer, put its U.S. division up for sale or partnership last year. "The company is taking and building out the part of its commercial businesses at which it has an extremely strong track record and better growth prospects than private-label credit,'' Nicholas Heymann, an analyst at Sterne Agee & Leach Inc. in New York, said in an interview.[3]
The first-quarter profit drop that triggered GE's biggest stock decline in two decades stemmed from other areas in finance, including real estate. "GE Capital, they're not a bank, they're a true finance company,'' said William B. Smith, senior portfolio manager at New York-based Smith Asset Management Inc., which oversees about $80 million, including about 66,000 Citigroup shares. "They are much better and more adept at dealing with this type of financing than I think Citigroup can allot mental capital to.'' Citigroup CEO Vikram Pandit is selling loans and securities to raise capital and has slashed more than 6,000 jobs while conducting what he calls a "front-to-back review'' of units that stretch across more than 100 countries.[3] Pandit has been shedding loans and securities to shrink the bank's $2.2 trillion of assets, and has trimmed over 6,000 jobs. Earlier in March, Citigroup decided to reorganize its U.S. wealth management unit, by dividing it into four segments, giving emphasis to the net worth of the clients. In March, Citigroup said that as part of its plans to strengthen its residential mortgage business, it would slash its U.S mortgage assets by 20%, or by nearly $45 billion. After losing $9.83 billion in the fourth quarter, which was also its biggest loss in its 196-year history, Citigroup plans to raise cash by selling stock and bonds, cutting its dividend and selling some of its businesses. The bank has sold stakes in Redecart and Simplex Investment Advisors, and cut some investments from its portfolio.[4] Citi said the deal is part of the company's plan to jettison 'non-core' businesses to focus on the most profitable opportunities. After losing nearly $10 billion in the fourth quarter, Citi embarked on a plan to raise cash by selling stock and bonds, cutting its dividend and selling some of its businesses. The bank has sold stakes in Redecart and Simplex Investment Advisors, and cut some investments from its portfolio.[7]
The company's assets reduced by $176 billion in the fourth quarter. Late March, Citigroup announced a comprehensive reorganization of its corporate structure, under which its Consumer Group would be split into two global businesses, namely Consumer Banking and Global Cards.[4] The acquired businesses have $13.4 billion in assets, 160,000 customers in North America and 1,400 workers.[7] GE Capital Solutions, which has about $129 billion in assets and 12,900 workers, will gain 1,400 employees and 160,000 customers in North America.[3]
Additional details were not immediately available. "This transaction allows Citigroup to release capital from non-core areas and redistribute that capital to areas with the greatest opportunities for profitable growth," said Peter Knitzer, chairman and chief executive officer of Citibank North America. Citigroup has been trying to strengthen its balance sheet and cut costs after a write-down for mortgages led to a record $US9.83 billion quarterly loss.[5] CitiCapital employs approximately 1,400 people and has 160,000 customers throughout North America. For Citi, the transaction is part of its efforts to direct capital to core businesses and drive operational efficiency. This transaction allows Citigroup to release capital from non-core areas and redistribute that capital to areas with the greatest opportunities for profitable growth. Vikram Pandit has been conducting intensive business reviews since his appointment as CEO of Citi in December last year. Pandit has been racing to reposition the bank after it lost more than half its market value in five months.[4] CitiCapital's Tax Exempt Finance business is not part of the transaction and would remain with Citi.[10]
CitiCapital's tax-exempt finance unit isn't part of the transaction, the statement said.[3]
Chief Executive Officer Jeffrey Immelt is building GE's commercial finance business and selling some assets at the GE Money consumer unit, which together are the largest U.S. non-bank finance company. [3] GE Capital had acquired Citigroup's transportation financial services business in 2005.[2] Credit markets are currently in turmoil, leaving some big financial services companies looking for ways to raise capital. Faced with that environment, GE will continue to look for opportunities to add to its core financial services businesses, Henson said. "When you've got an environment like you have today. we have the opportunity to do some deals at attractive economics," he said.[2]
GE Capital and Citi also are exploring cross-sell relationships with commercial clients, the companies said.[5]
"CitiCapital is a well established franchise with experienced employees, broad capabilities and a terrific customer base," Michael Neal, a G.E. vice chairman who was a dark-horse candidate for Citi's top job, said in a statement. "It's a business we know how to grow."[6]
GE also said full-year profit would trail the $2.42 a share forecast Immelt had repeated as recently as March 13. GE's finance-related businesses accounted for 44 percent of net income and 53 percent of profit from continuing operations last year, according to its annual SEC filings.[3] GE on April 11 said first-quarter profit from continuing operations dropped 12 percent to $4.36 billion, or 44 cents a share, missing the 51-cent average analyst estimate in a Bloomberg poll.[3]
All times are ET. : Time reflects local markets trading time. - Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. Disclaimer [1] MarketWatch, the MarketWatch logo, and BigCharts are registered trademarks of MarketWatch, Inc. Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges.[7]
Terms weren't disclosed for the acquisition of the seven equipment-financing lines from CitiCapital, the companies said in a statement today. [3]
SOURCES
1. GE Cap To Acquire Most Of CitiCapital
2. GE Capital to buy most of CitiCapital | Deals | Reuters
3. Bloomberg.com: Worldwide
4. GE Capital To Buy Most Of CitiCapital For Undisclosed Terms [GE] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
5. Business Spectator - GE Capital to buy most of CitiCapital
6. GE to Buy Most of Citis Commercial Lending Unit - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times
7. GE unit agrees to buy CitiCapital for undisclosed price
8. GE Capital to buy most of CitiCapital for undisclosed amount
9. Free Preview - WSJ.com
10. GE Capital Agrees To Buy Most Of Citigroup's CitiCapital In All Cash Deal - Quick Facts
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