GE said Tuesday that it has agreed to sell its U.S. Sponsor Finance business plus a $3 billion loan portfolio to Canada Pension Plan Investment Board (CPPIB). The transaction is valued at $12 billion. The deal includes Antares Capital, GE Capital’s lending business to private equity-backed middle market companies. Antares will operate as a stand-alone business led by managing partners David Brackett and John Martin. J.P. Morgan Securities LLC and Citigroup Global Markets Inc. provided financial advice.
FAIRFIELD, Conn.–(BUSINESS WIRE)–GE (NYSE:GE) announced today that it has reached an agreement to sell its U.S. Sponsor Finance business and a $3 billion bank loan portfolio to Canada Pension Plan Investment Board (CPPIB) in a transaction valued at approximately $12 billion.
We are excited to announce this agreement to sell Sponsor Finance to CPPIB,” said Keith Sherin, GE Capital chairman and CEO. “This represents an important milestone as we continue to execute on our strategy to sell most of the assets of GE Capital. The value we will achieve through this transaction is a testament to the depth of talent and expertise of the Sponsor team and our ability to execute high-value transactions quickly,” added Sherin.
As previously announced, GE is embarking on a strategy to focus on its high-value industrial businesses and is selling most GE Capital assets. GE and its Board of Directors have determined that market conditions are favorable to pursue disposition of these assets over the next 18 months. GE will retain the financing “verticals” that relate to GE’s industrial businesses.
The Sponsor Finance business is principally made up of Antares Capital, GE Capital’s lending business to private equity-backed middle market companies. Upon closing, CPPIB will retain the team and the brand of Antares Capital. It will operate as a stand-alone, independent business, led by its managing partners David Brackett and John Martin, who have led Antares since its formation. Stuart Aronson, CEO of GE Capital Sponsor Finance will remain with GE Capital.
GE Capital plans to continue to operate the Senior Secured Loan Program (SSLP), a joint venture between affiliates of GE Capital and affiliates of Ares Capital, for a period of time prior to closing to provide Ares and CPPIB the opportunity to work together on a go-forward basis. If a mutual agreement is not reached, it is GE Capital’s intention to retain the SSLP in the future so that it can execute an orderly wind down of this program ($7.6 billion GE Capital investment, $6.1 billion of which is attributable to Sponsor Finance). Similarly, GE Capital plans to operate the Middle Market Growth Program (MMGP), a joint venture between affiliates of GE Capital and affiliates of Lone Star Funds, for a period of time prior to closing to provide Lone Star and CPPIB the opportunity to work together on a go-forward basis. If a mutual agreement is not reached, it is GE Capital’s intention to retain the MMGP in the future so that it can execute an orderly wind down of this program ($0.6 billion GE Capital investment).
With this transaction of approximately $11 billion of ending net investment (ENI), GE Capital has announced sales of about $55 billion and is on track to execute sales of $100 billion by the end of 2015. The transaction, when completed, will contribute approximately $2.5 billion of capital to the overall target of approximately $35 billion of dividends expected to GE under this plan (subject to regulatory approval).
Mr. Sherin concluded, “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.”
The transaction is subject to customary regulatory and other approvals. The transaction is expected to close in the third quarter of 2015.
J.P. Morgan Securities LLC and Citigroup Global Markets Inc. provided financial advice to GE and Sidley Austin LLP provided legal advice.
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