GE Strikes Two Deals to Sell Railcar Operations
September 30 2015 - 9:18PM
Dow Jones News
By Josh Beckerman
General Electric Co., which is actively selling GE Capital
assets to focus more on core industrial activities, announced two
deals for railroad services operations that have been part of GE
Capital.
The conglomerate agreed to sell its tank car fleet assets and
railcar repair facilities to Marmon Holdings Inc., with part of the
deal closing on Wednesday and the rest slated for a fourth-quarter
closing. Diversified industrial organization Marmon is part of
Berkshire Hathaway Co.
Wells Fargo & Co. will buy the railcar leasing business, a
deal expected to close in the first quarter of 2016.
Terms of the sales weren't disclosed.
In April, GE Chief Executive Jeff Immelt said the company would
largely disband GE Capital, the collection of lending businesses
that once generated half of the company's profit. While GE Capital
is still profitable, Mr. Immelt said its returns have been
pressured in part by federal regulations put in place after the
financial crisis.
GE said Sept. 10 that Bank of Montreal will buy GE Capital's
transportation-finance business in the U.S. and Canada.
Generally, GE's divestitures of portfolios or business units are
selling at par or slightly above par because they are performing
assets and not distressed. They are also coming into the market
with a lot of demand from an array of financial firms that don't
have many other buying opportunities.
GE's announced asset sales for the year to date have reached $95
billion. In July, the company increased its 2015 target for GE
Capital asset sales to the range of $120 billion to $150 million,
up from $100 billion.
Wells Fargo Chief Financial Officer John Shrewsberry said in
July that the bank was working "as closely as we can" with GE,
especially for certain pieces of GE Capital's portfolio that "fit
neatly with our expertise."
In April, Wells Fargo agreed to buy $9 billion in property loans
from GE.
For the railcar leasing deal, Wells Fargo doesn't need the
formal regulatory approval that would be required if a bank is
looking at acquiring or merging with a bank holding company. Still,
there were supervisory discussions with regulators leading up to
this deal including questions around internal controls and if the
bank has enough capital for it, people familiar with the process
said. This is common for such deals or even deal possibilities,
these people said.
Earlier Wednesday, Mubadala GE Capital, a joint venture between
GE Capital and Mubadala Development Co., said it would sell
substantially all of its assets to MidCap Financial, a unit of
Apollo Global Management LLC.
Emily Glazer contributed to this article
Write to Josh Beckerman at josh.beckerman@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 30, 2015 21:03 ET (01:03 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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