General Electric Co. (NYSE: GE) has announced its plans to sell off its American healthcare finance unit. The buyer will be Capital One Financial Corp. (NYSE: COF), the credit card lender. The deal is valued at $9 billion and reflects the intention of GE to return to the company's industrial roots. The GE unit offers loans and mortgages to companies. Nursing homes can also take loans.
About Capital One
Capital One is a diversified lender and is ranked as seventh biggest US commercial bank. This transformation has been made possible through a slew of acquisitions, which included smaller businesses like healthcare lending and energy investment banking. According to Michael Slocum, the president of Capital One, this addition to the company will leapfrog it to be the market leader in providing financial services to healthcare sector. It is a strategic investment and relates to the specialty industry part Capital One has been building for last couple of years.
For Capital One, this deal with GE marks it as one of the largest from the time of 2008 financial crisis. The previous large-scale investment was when it purchased ING Direct USA. The sum paid was approximately $9 billion. This 2012 deal pushed the deposit-accepting bank to one of America's biggest online lenders.
GE has a number of reasons to sell its unit. Its finance arm, going by the name of GE Capital and the probable risk due to its lending portfolio made it included in government oversight. To escape this designation, GE has made the decision to sell-off the finance assets. The healthcare finance unit of the company provides direct loans to services and healthcare products companies. It also offers real estate loans where major customers were operators of many assisted living facilities and medical practices.
GE said on August 11 of its consent to sell approximately $600 million of that specific unit's equity investments in real estate to a buyer. The company declined to name the buyer. The group had earlier consented to sell off $26 billion worth of real estate assets in April to Blackstone Group LP (NYSE: BX) and Wells Fargo & Co (NYSE: WFC). Later on, GE also agreed to sell its portfolio of private equity lending to Canada Pension Plan Investment Board. The deal was closed at $12 billion.
Capital One will not displace the management team and employees of the healthcare lender. President Darren Alcus will also keep his job.