GE Capital ramps up disposal of financial services

GE Capital’s strategy of dispensing with non-core business in favour of a return to its traditional industrial and manufacturing specialisms is gathering pace with two major announcements of dispersals of its leasing operations.

Wells Fargo & Company has signed an agreement to purchase GE Capital’s commercial distribution finance and vendor finance platforms, as well as a portion of its corporate finance business in a deal which sees the lender take over total assets of approximately $32 billion as well as businesses employing approximately 3,000 team members.

The loan and lease portfolios are roughly 90% US and Canada-based. The transaction is expected to close in the first quarter of 2016.

GE Capital’s commercial distribution finance (CDF) business is a market leader in providing customized inventory financing to fund the flow of finished durable goods from manufacturers to dealers. Wells Fargo said CDF’s inventory finance products and deep customer relationships will complement and expand existing asset-based lending product offerings in its own capital finance division.

The deal delivers total assets of approximately $13 billion to Wells Fargo, along with approximately 2,000 OEMs and 40,000 dealers. The key industry sectors are listed as motorsports, marine, recreational vehicle, outdoor products, electronics & appliances, and technology, and 80% of customers in the U.S. and Canada. Business was $49.9 billion in volume in 2014.

Vendor finance business

GE Capital has also divested its vendor finance business which provides vendor and dealer financing programs for manufacturers and dealers of all sizes, and their customers, across the US and Canada, from Fortune 500 companies looking to offer private label financing to independent operations looking to manage cash flow. The business drives vendor sales growth by supporting dealers with inventory financing and by providing leases and loans to commercial end-user customers.

Wells Fargo said that as a leading provider of technology-enabled white label captive program and channel financing solutions, GE’s Capital’s vendor finance business will significantly expand current capabilities within its equipment finance business. Total assets transferred are approximately $9 billion, with over 40 equipment OEMs, 3,300 dealers; and over 160,000 end-user borrowers in the US and Canada. The business recorded $6.7 billion in originations in 2014, with key industry sectors being office imaging, construction, and technology / industrials.

Direct lending and leasing

GE Capital’s corporate finance business (also known as direct lending and leasing) provides senior secured asset-based loans as well as equipment leases and loans to middle-market customers. Wells Fargo is purchasing a portion of the business, which it says will ultimately be integrated into its existing capital finance and equipment finance businesses.

Under this part of the deal, Wells Fargo is taking over total assets of approximately $10 billion, along with 200 lending customers and 3,400 leasing customers in a range of industry sectors including food and beverage, retail, metals, forestry, oil and gas, marine, automotive, aerospace, and construction.

“This acquisition is an outstanding opportunity for Wells Fargo to deepen relationships and strengthen our presence in key commercial lending markets,” said Tim Sloan, head of Wells Fargo Wholesale Banking (pictured above). “GE Capital’s businesses are industry leaders with proven business models and capabilities backed by exceptionally talented and experienced teams. These advantages, in addition to portfolios that are diversified geographically and by industry, will allow Wells Fargo to continue to grow our business in order to better serve the needs of new and existing wholesale banking customers.”