According to Bloomberg,
General Electric Co. (GE) will finish shrinking its finance business by 2015 after spinning off the North American consumer lending unit, capping Chief Executive Officer Jeffrey Immelt’s effort to reduce credit risks.
As much as 20 percent of the unit will be sold in a 2014 initial public offering, GE Capital CEO Keith Sherin said today at an investor meeting in Norwalk, Connecticut. In a second step, the remaining shares will be distributed to GE stockholders in a tax-free transaction.
Divesting the business, whose products include store credit cards for companies such as Wal-Mart Stores Inc. (WMT) and J.C. Penney Co., bolsters Immelt’s bid to boost the share of earnings from units making industrial goods such as medical scanners. He has been slimming GE Capital since credit markets froze in the 2008-09 financial crisis, imperiling the parent company.
“GE isn’t reducing finance because it has a new religious attachment to industrial,” said Brian Langenberg, principal and director of research at Chicago-based Langenberg & Co. “This is about reducing the potential for future pain.”
The company has been chipping away at the finance unit by shedding real estate and home loans. GE Capital’s ending net investment, a measure of its balance sheet excluding non-interest-bearing liabilities and cash, slid to $418 billion last year from $556 billion in 2008. GE estimated it will fall as low as $300 billion with the consumer lending spinoff.
“This the final last step, the biggest step remaining in the transformation of the portfolio of GE Capital,” Sherin said at the investor meeting.
An IPO registration statement will be filed next quarter, and the transaction completed “later in 2014,” Fairfield, Connecticut-based GE said in a filing. Proceeds will remain with the new company to help it start as an independent lender, Sherin said. He declined to give a valuation for the business.