Capital One to buy GE Healthcare Finance for $9 bn
12 August 2015
Capital One Financial Corp will acquire General Electric Co's healthcare finance unit for about $9 billion, as the lender best known for its credit cards built a niche business into one of the industry's largest health financiers.
Capital One would acquire the operation and around $8.5 billion of healthcare-related loans, according to the companies statements yesterday. The Healthcare Financial Services unit, which GE is divesting as it unloads the bulk of its finance arm, provided mortgages and loans to companies including nursing homes.
Capital One chief executive officer Richard Fairbank has expanded the credit-card consulting firm he founded over two decades ago into a diversified lender that ranked as the seventh-largest commercial bank in the US. The transformation had come on the back of acquisitions that included smaller businesses, such as energy investment banking and healthcare lending.
''This addition will catapult us to a leading market position in providing financial services to the healthcare sector,'' Michael Slocum, president of Capital One's commercial bank, said in its statement. ''This is a strategic investment in a specialty industry segment that we have been building out for the past several years.''
The deal would bring GE a step closer to achieving its target of shedding about $100 billion worth of finance assets by the end of this year. The latest sale, expected to close in the fourth quarter, would take GE's announced divestitures of finance assets to about $78 billion.
Reuters last week reported that Capital One was in exclusive talks to acquire GE's healthcare finance unit and that it had outbid other potential buyers in an auction for the unit. The size of GE's finance arm GE Capital as also the potential risk stemming from its lending portfolio had made it subject to government oversight.
GE plans to apply next year to escape its designation as a systemically important financial institution after the sale of finance assets.
For Capital One, the deal would bolster its healthcare lending operations.
GE's healthcare finance unit offered direct loans to healthcare product and services companies as also real estate loans to operators of assisted living facilities, nursing homes and medical practices.
GE further said yesterday that it agreed to sell about $600 million of the unit's real estate equity investments to another buyer, which it did not name. In April, GE agreed to the sale of around $26 billion of real estate assets to Wells Fargo & Co and Blackstone Group LP.
General Electric Co is set to sign a $12-billion deal to sell over half its US private-equity lending arm to Canada Pension Plan Investment Board even as Ares Management LP eyes the rest of that business, Bloomberg reported citing sources (See: GE to sell over half of GE Antares to Canada Pension: Reports).