General Electric Co. (GE) has agreed to sell its U.S., Mexico, Australia and New Zealand fleet businesses for $6.9 billion, with a separate smaller deal in the works to unload its business in Europe, marking the latest steps in the industrial group's retreat from banking.
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In the first transaction, GE has agreed to sell fleet assets held by financial unit GE Capital to Canada's Element Financial Corp. The U.S. and Mexico part of the deal is expected to close in the third quarter this year, with the Australia and New Zealand part in the fourth.
GE has also signed a memorandum of understanding for the potential sale of its European fleet businesses to Arval, a fully owned unit of France's BNP Paribas SA, before the end of the year. That disposal includes a fleet of 160,000 vehicles in 12 countries, valued at €2.4 billion as of March 31. Arval and Element work as partners in North America.
"We are on track to execute sales of $100 billion by the end of 2015 and expect to be substantially done by the end of 2016,' said Keith Sherin, GE Capital Chairman and Chief Executive.
GE has embarked a strategy to sell most of GE Capital's $500 billion in assets, with the private-equity-lending unit sold to Canada's largest pension in a deal valued at $12 billion earlier this month. GE is largely getting out of the banking business after years in which investors urged the company to get back to its industrial roots as market conditions and federal regulations weighed on the finance unit's returns. Announced sales have totaled $63 billion.
GE Capital Fleet Services provides commercial car and truck financing and fleet-management services.
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For Element, the deal marks the second with GE after it bought GE Capital's Canadian fleet-management business in 2013, and will boost its assets to more than 21 billion Canadian dollars.
"Adding these very high quality businesses to our existing fleet operations firmly establishes Element as a leader in the North American fleet-management industry," said Steven Hudson, Element's CEO.
Element plans to finance the acquisition with proceeds from a recent C$2.7 billion securities offering and with C$5.9 billion in debt, while forecasting $90 million to $95 million in yearly cost savings and revenue gains from the deal.
BNP Paribas, one of France's largest banks, said the two deals with GE Capital would broaden the reach of the Element-Arval Global Alliance, set to manage 3 million vehicles in some 40 countries.
The impact of the deal on BNP Paribas' balance sheet would be limited, offset in part by the sale last month of a 7% stake in real estate unit Klé pierre SA--sold for €870 million ($957 million)--the bank said. If approved, the Arval transaction is targeted to close in the fourth quarter, the bank said.