GE to Sell Health-Care Financial Services Operations to Capital One

Capital One will become a lender to nursing homes, hospitals and other health care…

General Electric continued its campaign to shrink its huge finance arm, announcing Tuesday that it will sell its health care lending business to Capital One for about $US9 billion ($12.3 billion). Capital One will acquire the operation and about $8.5 billion of health care-related loans, GE said Tuesday in a statement.

General Electric Company (NYSE:GE) had put the Healthcare Financial Services unit on the block as part of Chairman of the Board, Chief Executive Officer Jeffrey R. Immelt plan to exit out of the finance sector and reorient the company as a pure play manufacturing and industrial sector player.

As for GE, the deal, which is expected to be finalized in the fourth quarter, is the latest step in achieving its goal to shed about $100 billion worth of finance assets by the end of the year, bringing the total sold so far to roughly $78 billion.

We believe the acquisition is a positive for Capital One from both a strategic and financial perspective. Separately, GE reached a deal with an unidentified buyer to sell approximately $600 million of real estate equity investments.

The McLean, Virginia-based company bought ING Direct USA for about US$9 billion in 2012, building its deposit-taking bank into one of the largest online lenders in the nation.

Now the company Insiders own 0.7% of Capital One Financial Corporation Company shares. About the sale to Capital One, GE Capital GE Capital CEO said, “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”. The group hopes to escape the regulator’s oversight by cutting back on its financial business. Investors have urged the company to return to its industrial roots amid a wave of federal regulations and changing market conditions that have weighed on returns.

Several analysts have recently updated their ratings and price targets for Capital One Financial Corp.

GE has a number of reasons to sell its unit. They set a “buy” rating and a $97.00 price target on the stock. Capital One Financial Corp. has a 1-year low of $72.77 and a 1-year high of $92.10. On the financial side, as noted above, we think this deal is nicely accretive to our 2016 estimates, all else equal, particularly when considering that it will have no impact on Capital One’s approved capital plan. The total amount of the transaction was worth $165,562, according to the disclosed information with the Securities and Exchange Commission in a Form 4 filing.