General Electric (GE) will be divesting its private equity business for $12bn (£7.8bn) to Canada Pension Plan Investment Board as it focuses its energies on the core industrial businesses.
The scope of the transaction would include the sale of its sponsor finance business including Antares Capital and a bank loan portfolio to Canada’s largest pension fund worth $3bn.
Once the sale is completed, Antares Capital will operate as a stand-alone business.
This is GE’s first major move since it first announced its decision to unload about $200bn of its capital assets in April.
After this sale, GE plans to sell around $100bn in ending net income by the end of 2015. The capital from the sales would allow the company to expand its capital returns to shareholders through dividends and share repurchases.
GE had been under immense pressure from investors to divest its finance unit despite of it being profitable because it was becoming less lucrative and at time risky due to stringent federal regulations and tough market conditions, reported the Guardian.
GE Capital CEO Keith Sherin said: "This announcement is the next step in GE’s transformation to a more focused industrial company. The sale of Sponsor Finance aligns with our strategy to pair a smaller GE Capital with GE’s long-term industrial growth."
Canada Pension, that often operates like a private-equity firm handles the retirement savings of 18 million Canadians.
Canada Pension’s CEO Mark Wiseman said: "This acquisition exemplifies our strategy to achieve scale in key sectors through platform investments. It secures a market-leading business that is exceptionally well positioned to deliver value-building investment flows."
Image: This is GE’s first major divestment since its April announcement. Photo: courtesy of Adamr/freedigitalphotos.net.