General Electric Co is near a deal to sell its private equity lending unit to the Canada Pension Plan Investment Board (CPPIB), a person familiar with the matter said, as the conglomerate takes a big step in a planned massive pullback from its finance operations.
The deal with the CPPIB, Canada’s biggest pension fund, is expected to include GE’s Antares Capital business, a middle-market lender for private equity-backed transactions, the source said. It does not, however, include all of GE’s U.S. sponsor finance business, such as the joint venture with Ares Management, the source added.
GE and the CPPIB are aiming to sign the deal on Monday, the Wall Street Journal first reported on Sunday, citing people familiar with the matter. Terms are still being negotiated for a takeover that would include more than US$10 billion of assets but less than the unit’s full book of US$16 billion, the newspaper added.
GE’s retreat from lending and a broader move to reduce its exposure to its finance arm comes as U.S. regulators move to curb aggressive lending by financial institutions that could pose systemic risk.
GE announced plans in April to exit US$200 billion worth of finance assets as it focuses on the manufacturing of industrial products.
GE and CPPIB declined to comment. The source declined to be named because the deal is not official yet.
CPPIB had already started a direct lending business in an effort to invest more in high-yielding assets that will help it fund its long-term liabilities. Were it to clinch the deal, it would become one of the largest lenders to private equity firms in North America.
GE’s exit from private equity lending could also create opportunities for other lenders to gain ground in U.S. middle-market lending, by competing for lead arranger mandates, pitching new business to GE’s existing portfolio companies or by winning larger allocations on deals.
CPPIB manages the assets of the Canada Pension Plan, a social insurance program that forms part of Canada’s public retirement system.
It is not known yet who will buy the remaining assets of GE’s private equity lending business. Guggenheim Securities Inc, Apollo Global Management LLC and Ares have also made offers for the unit, Reuters previously reported.
By Lewis Krauskopf
(Additional reporting by Greg Roumeliotis, Mike Stone and Allison Lampert; Writing by Catherine Ngai; Editing by Eric Walsh and Muralikumar Anantharaman)
(This story has been edited by Kirk Falconer, editor of peHUB Canada)
Photo courtesy of Reuters/Brendan McDermid