Continuing with its landmark asset offloading program,General Electric Company GE inked an agreement to sell its equipment lending and leasing business in Mexico to Linzor Capital Partners, a prominent pan-regional private equity firm that focuses on Latin American middle market investments.
The transaction is dependent on customary regulatory and other approvals, and is expected to close by the end of the first quarter of 2016.
The divestment represents aggregate ending net investment (“ENI”) of about $1.1 billion. The deal will likely contribute about $100 million toward GE’s targeted dividend of $35 billion under the divestment plan.
Linzor is extensively invested across Latin America, and holds investments in the industrial, financial, retail, education, and consumer finance sectors. Linzor also bought GE Capital’s Trailer Fleet Services business in Mexico in 2011. The private equity firm is dedicated to investing in and expanding the Latin American financial services industry.
The deal also represents GE’s final slated sale in Mexico.
With this latest deal, the total ENI for GE’s announced asset sales for 2015 have reached $146 billion year-to-date, well ahead of its schedule.
Separately, GE also concluded the sale of a portfolio of first lien mortgage loans from its UK Home lending business. The sales represent aggregate ending net investment ("ENI") of about $5.8 billion. With the completion of the sale, GE has almost reached its previously targeted goal of slashing GE Capital’s ENI by $100 billion this year.
The sales are a part of GE’s massive $200 billion asset offloading program spearheaded by CEO Jeff Immelt, as the conglomerate strives to shrink its financial arm and return to its industrial roots.
GE plans to shed over four-fifths of its finance arm, drawing an end to the era when it relied on the freewheeling business’ financial engineering skills to generate half of its profits. Post completion of the exit strategy, GE expects to derive about 90% of its annual earnings from industrial businesses.
Immelt asserted that the low interest rates currently prevalent in the economy, coupled with abundant liquidity in the corporate market, present a great climate for asset sell-off, and the conglomerate is exploiting a “window of opportunity” to sell while these conditions persist.
By and large, GE’s sales of portfolios or business units have been selling at par or slightly above par, as they are performing assets and not distressed. Also, there is significant demand for these assets from financial firms that have very few good buying opportunities.
GE presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering now include Blue Nile Inc. NILE, Federal Signal Corp. FSS and Macquarie Infrastructure Corporation MIC, each sporting a Zacks Rank #2 (Buy).
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