GE Decides to Sell Japanese Commercial Finance Business
General Electric Co. is planning to get rid of its surplus assets, owing to which it is selling its Japan-based commercial finance company worth $5 billion.
This move comes shortly after Jeff Immelt, the chief executive officer of GE, announced plans to sell assets worth $500 billion belonging to its capital unit. In March, GE disposed of its consumer lending firms in New Zealand and Australia.
The company’s decision to sell its Japan-based business is partly to woo investors who have demanded that GE should get rid of its surplus assets following regulatory issues that cut down the revenue generated by finance companies owned by GE.
The leasing unit of Mitsubishi UFJ Financial Group Inc and Sumitomo Mitsui Financial Group Inc are expected to bid for GE’s Japan-based commercial leasing and lending company, the asset value of which is around $5 billion. The equity that is required to purchase it depends entirely on the financing of these assets. GE’s adviser is handling the sale procedure, and reliable sources say that the sale will be concluded in the following months.
The Japanese commercial lending firm has a number of divisions, including one that deals with direct lending to industries that purchase heavy machinery such as cranes. Other divisions deal with vendor fencing, assisting manufacturers to supply finance packages to small businesses for a number of smaller purchases. Its most attractive division is a fleet management company that assists huge Japanese firms such as logistics and trucking operations to manage and finance their automobile and truck ownership. GE is not selling its aviation financing division.
Japanese banks consider the financing and leasing of purchases of large equipment more attractive than traditional lending businesses that come with low rate of interest. They like purchasing risky assets that promise strong returns and therefore acquire the capital-heavy assets that financial firms in the West are trying to shed because of the financial crisis.
The Mizuho Financial Group Inc. purchased the US loan assets of the Royal Bank of Scotland Group for $3 million in February. And in December, SMFG signed a deal to purchase a Japanese retail bank in a bid to grow its wealth management firm at home. In 2008, tight regulations in Japan forced the US conglomerate to sell its consumer finance business to Shinsei Bank for $5.4 billion.
By getting rid of its finance businesses worldwide, GE plans to concentrate on its industrial business and delve into the energy sector.
