General Electric Company (NYSE: GE) continues to offload its GE Capital financial assets as part of its long-term strategy, retaining only those that support its Industrials unit. This latest move by the conglomerate was recently announced when GE revealed that it had agreed to shed the GE Capital Interbanca unit in a deal with IFIS. General Electric’s transaction with the Italian bank is valued at $2.2 billion, which is equivalent to 2 billion euros.
Under the mentioned deal, IFIS would also absorb the Interbanca unit’s debt amounting to 1.8 billion euros. Although a detailed timeline of the deal has not yet been revealed, the conglomerate is anticipated to finalize it before the end of 2016.
Banca IFIS would utilize its own liquidity and bank lending, supported by its own assets as well as that of Interbanca in order to fund the acquisition deal. According to Giovanni Bossi, the Banca IFIS CEO, the company would no longer need to boost its capital for the acquisition and would utilize its own balance sheet for the financing.
The Interbanca unit of GE Capital focuses on medium-term financing and leases to companies in Italy. Yet, the segment had reported a 45 million euro loss by the end of the previous year. In total, GE Capital Interbanca has 480 employees. After the acquisition deal, the total workforce of Banca IFIS will reach a total of 1,300 employees.
The conglomerate has embarked on a long-term strategy to offload its GE Capital assets, aiming to shed its financial assets amounting to $200 billion by the end of this year. Since the announcement, the corporation has inked deals valued at approximately $189 billion, and $168 billion of which have already been finalized. Moreover, the proceeds from these divestitures would also be utilized for increasing shareholder value, returning dividends amounting to $35 billion.
One of the most significant milestones in the plan of General Electric to offload its GE Capital segment was being able to rid itself of its non-bank systematically important financial institution (SIFI) status. This development was only made possible due to the similar agreements that were made earlier.
This latest news regarding the Interbanca unit would be another milestone for General Electric, which also disclosed just recently that it had divested a 14.4 percent interest in Penske Truck Leasing Company to Penske Automotive Group.
As of 4:10 AM GMT -4 on July 29, the GE stock is changing hands at $31.25, down by 0.10 percent or 0.03 points.