GE to Buy Citigroup’s Transportation-Finance Unit
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General Electric Company’s GE Commercial Finance unit said yesterday it will buy Citigroup Inc.’s CitiCapital Transportation Services Group for $4.4 billion.
The deal brings benefits to both companies. GE has said that it intends to steadily expand its commercial finance business, while Citigroup has said it planned to part with slower-growing parts of its business.
In May, GE Commercial Finance bought assets from Boeing Co.’s Boeing Capital Corp. and last year said it would buy Transamerica Finance Corporation’s commercial lending business. Transamerica is a subsidiary of Aegon NV.
The Citigroup deal “makes a lot of sense” because the transportation sector is one that is familiar to GE Commercial Finance and has room to grow, said GE’s Commercial Finance chief executive, Mike Neal, in a prepared statement.
The Citigroup business, which finances about 196,000 heavy and medium-duty commercial trucks, will remain based in Dallas.
CitiCapital will recognize a gain of about $90 million from the transaction, which is subject to regulatory approvals and is expected to close as early as the end of the year.
“This transaction is another step in our effort to allocate capital most effectively throughout our businesses,” the president and chief operating officer of Citigroup, Robert B. Willumstad, said in a press release yesterday.
Earlier this year, Citigroup said that it was undertaking a “garage sale” to redeploy capital to more profitable and higher growth opportunities, said a banking analyst at Lehman Brothers Inc., Jason Goldberg.
“This is just another example of that endeavor,” he said. Mr. Goldberg added that the company didn’t have the scale necessary in the transportation finance business to compete effectively and so it makes sense that Citigroup is refocusing on more of its core operations.
Mr. Goldberg owns shares of Citigroup, and his firm has an investment-banking relationship with the company.
A GE spokesman declined to comment on any potential staff layoffs.