GE selling health care finance unit, loans to Capital One

General Electric (GE – Get Report) stock is up 0.35% to $25.80 in after-hours trading on Tuesday, after the company agreed to sell its Healthcare Financial Services unit to Capital One Financial (COF) for nearly $9 billion. The Company’s main subsidiaries include the following: Capital One Bank (NYSE:COF), National Association (COBNA), which offers credit and debit card products, other financing products and deposit goods, and Capital One, National Association (CONA), which offers a variety of banking products and financial services to consumers, small businesses and commercial clients.

The GE unit lends money to financial companies, investors and developers across assorted parts of the health-care industry, where merger activity and stock prices have both been trending higher of late.

“This is a strategic investment in a specialty industry segment that we have been building out for the past several years”, said Michael Slocum, president of Capital One’s commercial bank, in a statement. Deutsche Bank reiterated a “buy” rating and set a $92.00 price target on shares of Capital One Financial Corp.in a research note on Thursday. The business had revenue of $5.70 billion for the quarter, compared to the consensus estimate of $5.74 billion.

Credit Suisse and Wells Fargo Securities were financial advisers to Capital One and Wachtell, Lipton, Rosen & Katz was the legal adviser. GE valued the loans that the pension fund is acquiring at about $11 billion, meaning that the buyer paid about $1 billion for the business as a going concern.

“This transaction is another example of the value generated by GE Capital’s strong businesses and exceptional teams as we continue to demonstrate speed and execute on our strategy to sell most of the assets of GE Capital”, said Keith Sherin, GE Capital chairman and CEO.

The banking operations imperiled the parent company during the 2008 financial crisis.

The ultimate goal is to reduce GE Capital’s ending net investment, or GE’s measure of assets, by $200 billion by the end of next year.

GE announced in April that it would sell most of the assets in the GE Capital subsidiary as it focuses on industrial businesses – making large, complicated equipment for other companies.

The unit contains about $US8.5 billion worth of assets.

Separately, GE said Tuesday that it is selling $600 million of the unit’s real estate equity investments to another buyer.

Capital One (NYSE: COF) expects the acquisition to close in the fourth quarter of this year. Capital One also will retain the HFS management team and employees.

Ryan Dezember contributed to this article.