A triumvirate of private equity firms KKR & Co (KKR, Financial), Varde Partners and Deutsche Bank (XETRA: DBK) have sealed the deal to buy GE Capital's consumer finance vertical, serving Australia and New Zealand, for $8.2 billion. This is the largest deal to ever be struck in Australia and the value quoted is the enterprise value of the loans and finance business. The actual dollar amount is, as yet, undisclosed.
GE Finance boasts a strong customer base of over 3 million serviced customers, which includes some of the largest names in the retail business in Australia and New Zealand. “"GE Capital is one of the most respected providers of consumer finance in Australasia. They are led by a strong management team with an outstanding track record of partnering with the leading retailers,"- KKR Australia director Ed Bostock mentioned, citing the successful position of the finance business as the reason for the consortium of investors to consider acquiring GE Finance. Despite the change in ownership, the company will continue to make headway into commercial mid-market lending and leasing in the region, assured Duncan Berry, CEO GE Capital – Australia and New Zealand.
The Australasian arm of GE’s consumer loans business offer customers a host of services ranging from personal loans and credit cards to retail finance. It provides loans to 1 in 4 mid-market businesses in Australia, and is one of the largest lenders to the segment. Over 10,000 retailers have tied up with GE Australia to finance their consumer loans. These loan structures and services shall remain unchanged under the new management and ownership after the acquisition.
Curtailing losses
General Electric Co. (GE, Financial)Â has been downsizing its financial services vertical GE Capital Corp, since it began sinking during the 2008-2009 financial crisis. It used to be one of the most profitable arms of the company prior to the crisis, but it started to weigh the parent company down after the economic downturn. GE has also sold off its appliances unit, shed its real estate holdings and dissolved its stake in NBC Universal. In June last year, Spanish banking group Banco Santander (LON: BNC) bought the Scandinavian consumer finance vertical. GE now wants to build on funding heavy equipment purchases and loans for mid-size companies and drive investment towards commercial real estate. “"We will continue to work with our customers in key industries including oil and gas, energy, healthcare, aviation and mining,” Geoff Culbert, President and CEO - GE Australia and New Zealand said to news agencies, on the sidelines of announcing the deal.
KKR & Co, Varde Partners and Deutsche Bank beat a joint bid from Wesfarmers Ltd (WES, Financial)Â and Apollo Global Management LLC (APO, Financial) to acquire GE Finance, after negotiations that ran on for months.
This is the second multi-billion deal in Australia in a couple of weeks and the largest ever. It is, in fact, the largest deal in the Asia-Pacific region. Japanese state-owned postal and banking services provider Japan Post Holdings Co. Ltd., scheduled to go public in later 2015, acquired transport and logistics company Toll Holdings for $6.5 billion.
Final conclusion
The new and more streamlined financial wing of GE looks poised to take on the market with a more focussed, aggressive outlook after its consumer finance wing’s acquisition is completed. The focus of GE now is to strengthen its core industrial and healthcare verticals.
