General Electric Company (NYSE:GE) and State Street Corp (NYSE:STT) announced an agreement for State Street to acquire GE Asset Management (GEAM), GE’s investment management arm, for up to $485 million, subject to adjustments. This announcement follows GE’s previous announcement in September that it would explore opportunities to sell GEAM to another leading investment management firm.
The sale, part of GE’s transformation to focus on its industrial core, will bring GEAM’s capabilities to State Street Global Advisors (SSGA), augmenting and enhancing SSGA’s investment expertise in areas complementary to its existing capabilities, including active management, as well as in alternative assets and Outsourced Chief Investment Officer (OCIO) mandates. It is also expected to increase SSGA’s assets under management by approximately $100 billion, as it assumes responsibility to manage the assets related to GE’s primary benefit plans currently managed by GEAM—including the GE pension plan—in addition to those of GEAM’s third-party client base, subject to client consents. The existing GEAM team is expected to join SSGA as part of this transaction, with the exception of a small number of GEAM employees who will stay with GE to provide investment oversight of GE’s primary benefit plans. To provide a smooth transition for clients, the core investment and relationship management teams serving GE’s benefit plans and other clients will continue to do so as part of SSGA following the closing.
“This sale is another example reflecting the attractiveness of GE’s financial services businesses in the marketplace,” said GE Chairman and CEO Jeff Immelt. “In addition, it presents a great opportunity for GE’s primary benefit plans to benefit from the world-class capabilities of SSGA. Most importantly, SSGA meets all the criteria GE originally established for the firm that would acquire GE Asset Management, including considerable experience managing retirement assets, investment and fiduciary expertise, a strong performance track record, and scale and distribution leadership.”
Dmitri Stockton, Chairman, President and CEO of GEAM, said, “SSGA is another outstanding investment firm with an expanded distribution network and $2.3 trillion in assets under management. This transaction will allow our firm to bring its active and alternative asset management capabilities to an even broader investor base, and enhance SSGA’s ability to grow its presence in the pension plan outsourcing segment. GE Asset Management has extensive, long-term experience in pension plan management and outsourcing offerings with a more than 80-year heritage as a provider of these services.”
“As defined benefit plans – both private and public – undergo change, GEAM’s skills coupled with SSGA’s existing capabilities will position us well to provide effective solutions and outcomes to these investors,” said Ron O’Hanley, President and Chief Executive Officer of SSGA. “GEAM will bring new alternatives capabilities in direct private equity and real estate to SSGA while enhancing our existing active fundamental equity, active fixed income and hedge fund teams. In addition, GEAM’s OCIO and Insurance platforms significantly strengthen our capabilities in these fast growing areas.”
An independent fiduciary, Evercore Trust Company, N.A., has reviewed the transaction and approved SSGA’s engagement to manage the assets related to the GE pension plan currently managed by GEAM. GE will retain responsibilities as plan sponsor and fiduciary for its plans going forward. Net sale proceeds from the transaction will be deposited into the GE Pension Trust, increasing trust assets used to pay GE pension plan benefits.
As the transaction proceeds, GEAM will maintain its commitment to fulfilling all of its obligations to its clients. GEAM and SSGA expect no impact on their ability to provide strong investment performance and service to investors through and following the close of the deal.
The sale, which is expected to close in the third quarter of this year, will not change the benefits received by participants in the GE pension plan (or any affiliate pension plan), and does not change GE’s requirement to meet its pension funding obligations. (Original Source)
Shares of General Electric are up half percent to $31.61 in pre-market trading. GE has a 1-year high of $31.70 and a 1-year low of $19.37. The stock’s 50-day moving average is $29.79 and its 200-day moving average is $28.79.
On the ratings front, General Electric has been the subject of a number of recent research reports. In a report issued on March 16, Credit Suisse analyst Julian Mitchell reiterated a Buy rating on GE, with a price target of $34, which represents a potential upside of 8.0% from where the stock is currently trading. Separately, on March 15, UBS’s Shannon O’Callaghan reiterated a Buy rating on the stock and has a price target of $32.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Julian Mitchell and Shannon O’Callaghan have a total average return of 10.3% and 16.6% respectively. Mitchell has a success rate of 71.2% and is ranked #322 out of 3766 analysts, while O’Callaghan has a success rate of 80.2% and is ranked #63.
The street is mostly Bullish on GE stock. Out of 11 analysts who cover the stock, 8 suggest a Buy rating and 3 recommend to Hold the stock. The 12-month average price target assigned to the stock is $31.71, which represents a slight upside potential from current levels.