According to a Reuters report, diversified conglomerate General Electric Company (GE) is currently exploring various options to divest its GE Money Bank unit in the Nordic region. The strategic move is part of General Electric’s continued effort to reduce credit risks and focus on its core industrial businesses.
The report cited that the sale can bring up to $2.75 billion for General Electric, as per sources. The finance unit is being sought after by private equity firms and strategic players, which have a significant consumer finance presence in the region.
Established in 1993, GE Money Bank has 800 employees on its payroll. This finance arm of GE Capital deals with loans, credit cards, deposits and insurance in Denmark, Norway and Sweden. GE Capital is reportedly working with Bank of America Merrill Lynch, the investment baking division of Bank of America Corp. (BAC), to review various options.
Earlier in March, General Electric had filed an initial public offering (IPO) of its North American consumer lending unit. The IPO is expected to close by late 2014. Subsequently, GE Capital Retail Finance will operate under the name “Synchrony Financial” and will trade on the New York Stock Exchange under the symbol SYF.
This North American consumer lending business includes store credit cards for retail giants like Wal-Mart Stores Inc. (WMT) and J. C. Penney Company, Inc. (JCP). General Electric will sell 20% of this business through the IPO. The remaining shares of the unit will be distributed to the shareholders of the parent company in a tax-free transaction.
General Electric expects profit from GE Capital to drop to $7 billion in 2014 and further to $5 billion in 2015. The company also intends to increase its earnings mix from industrial manufacturing businesses to at least 70% by 2016, up from about 55% in 2013.
The premeditated divesture of the GE Money Bank unit in the Nordic region will further realign the corporate strategy of the company to a manufacturing-based entity with a diligent focus on big-ticket items such as medical equipment and scanners.
General Electric is one of the largest and the most diversified technology and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, the company serves over 100 million customers worldwide. Its segments include Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions, and GE Capital.
General Electric currently has a Zacks Rank #4 (Sell).