By Joanne Chiu
General Electric Co. 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.
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 include a fleet of 160,000 vehicles in 12 countries,
valued at EUR2.4 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.
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 Klépierre SA for EUR870 million ($957 million),
the bank said. If approved, the Arval transaction is targeted to
close in the fourth quarter, the bank said.
--Inti Landauro contributed to this article.
Write to Joanne Chiu at joanne.chiu@wsj.com
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