General Electric Company (NYSE:GE) announced that it has reached an agreement to sell its U.S., Mexico, Australia and New Zealand fleet businesses to Element Financial Corporation (TSX:EFN) for US$6.9 billion. Separately, GE has signed a memorandum of understanding for the potential sale of its European fleet businesses to Arval, a fully owned subsidiary of BNP Paribas. Arval and GE will now consult with their respective works councils. The transactions’ completion will also be subject to customary regulatory and other local corporate or antitrust approvals.
“We continue to demonstrate speed and execution on our strategy to sell most of the assets of GE Capital,” said Keith Sherin, GE Capital chairman and CEO. “We are on track to execute sales of US$100 billion by the end of 2015 and expect to be substantially done by the end of 2016,” he added.
GE Capital Fleet Services provides commercial car and truck financing and fleet management services, with more than 1.5 million leased, serviced and managed vehicles around the world. Element Financial Corporation is one of North America’s premier fleet management and equipment finance companies. GE Capital sold its Canadian fleet business to Element in 2013. BNP Paribas, through its fully owned subsidiary, Arval, specializes in full service vehicle leasing in 25 countries and in 14 other countries through a network of partners, including a global alliance with Element. Excluded from the transactions is GE Capital’s fleet business in Japan.
“Both Element and Arval are invested in and committed to growth in the fleet industry and our customers will benefit from their strength and expertise,” said 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.
Both transactions represent an aggregate of about $8.6 billion of ending net investment (ENI), approximately US$6.0 billion to Element and about US$2.6 billion to Arval. This brings GE Capital’s total announced sales to about US$63 billion to date. GE is on track to execute sales of US$100 billion by the end of 2015. The transactions would, if completed, contribute approximately US$1.8 billion of capital to the overall target of approximately US$35 billion of dividends expected to GE under this plan (subject to regulatory approval).
Sherin concluded, “This announcement is the next step in GE’s transformation to a more focused industrial company.”
The U.S. and Mexico transaction is expected to close in the third quarter of 2015, and the A&NZ transaction in the fourth quarter of 2015, subject to customary regulatory and other approvals. If approved, the Arval transaction is targeted to close in the fourth quarter of 2015.
J.P. Morgan Securities LLC provided financial advice to GE and Weil, Gotshal & Manges LLP provided legal advice. (Original Source)
Shares of General Electric closed last Friday at $27.09 . GE has a 1-year high of $28.68 and a 1-year low of $23.41. The stock’s 50-day moving average is $27.17 and its 200-day moving average is $25.60.
On the ratings front, General Electric has been the subject of a number of recent research reports. In a report issued on June 26, William Blair analyst Nicholas Heymann reiterated a Hold rating on GE, with a price target of $30, which implies an upside of 10.7% from current levels. Separately, on June 18, Deutsche Bank’s John G. Inch maintained a Hold rating on the stock and has a price target of $29.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Nicholas Heymann and John G. Inch have a total average return of -0.7% and 9.0% respectively. Heymann has a success rate of 50.0% and is ranked #2769 out of 3681 analysts, while Inch has a success rate of 81.0% and is ranked #1146.
The street is mostly Bullish on GE stock. Out of 7 analysts who cover the stock, 4 suggest a Buy rating and 3 recommend to Hold the stock. The 12-month average price target assigned to the stock is $33.00, which represents a potential upside of 21.8% from where the stock is currently trading.