Western Alliance Bank to buy part of GE Capital assets

By Staff Writer

Mar 30, 2016 04:33 AM EDT

General Electric Co has announced that Western Alliance Bank would buy GE Capital assets. General Electric has decided to focus on its core industrial operations. As part of this strategy, GE is offloading GE Capital assets enabling it to confine totally to the industrial segment globally. The sale transactions may be completed by end of this year. 

The sale proposal on offloading assets of GE Capital by General Electric Co has been on anvil for some time. GE Capital provides real estate financing to US hotel owners. In 2015, it announced that it would offload GE Capital business, making more space for global industry.   

The Wall Street Journal reports that another franchise-financing business engaged in Canadian hospitality and restaurant sectors would be sold to a different buyer. However, GE Electric didn't provide the details about the transaction and sale price. The size of financial operations is pegged at $1.4 billion for US business and $300 million for Canada operations.

GE has signed on sale agreement for $161 billion worth of finance assets as against its target of $200 billion. It will gradually withdraw from financing and other non-core activities totally. US Federal Reserve has approved the purchase proposal of Goldman Sachs Group Inc for a bank owned by GE Capital. 

Street Insider further adds that US hotel business and Canadian transactions are expected to add about $0.2 billion capital once the sale transaction is completed. It's estimated that $35 billion of dividends would be paid to GE and this is subject to regulatory approval. These two transactions may be completed by second quarter of 2016. The financial advisor on both the deals to GE is Barclays.    

Keith Sherin, GE Capital Chairman and CEO, said "We're pleased to sell the US hotel portion of our Franchise Finance business to Western Alliance, a fast growing bank that is committed to the business, customers and employees. Combined with the sale of our Canadian Franchise business, this represents a significant portion of Franchise Finance, our last North American business to be sold as part of our plan to significantly reduce the size of GE Capital."

Hogn Lovells is providing legal advice for the US hotel transaction, while McCarthy Tetrault LLP will take the legal services on Canadian transaction. GE is focusing on its core industry segment. However, it will retail financing verticals pertaining to industrial business.

GE, in April 2015, announced its intention to sell off GE Capital assets. Since then, GE signed agreements worth $161 billion and closed $138 billion of them. GE is also planning to sell $200 billion GE Capital businesses globally. GE is expected to complete the process by 2016. 

Robert Sarver, Chairman and Chief Executive Officer of Western Alliance, is optimistic on the acquisition. The deal is expected to strengthen Western Alliance to establish a new presence in risk-adjusted return and select-service hotel industry. Western Alliance will also be benefited from underwriting and credit management capabilities of GE Capital, as reported by Business Wire.

Phoenix-based Western Alliance Bancorp, the parent company of Western Alliance Bank, is hoping to close the buying deal in April 2016 and will immediately add to earnings per share (EPS).  Western Alliance Bancorporation manages $14 billion assets and is one of the fast growing bank holding companies in the US.

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