General Electric Co. is shopping Canadian assets of GE Money, which includes its near-prime alternative mortgage lending business, as it restructures its global retail, banking and consumer financing business, according to sources.
London-based GE Money, which has more than $200-billion (U.S.) in assets and operations in more than 50 countries, announced two major deals yesterday.
Mississauga-based GE Money Canada is talking to prospective buyers of various assets, and Toronto-Dominion Bank is rumoured to be among the financial institutions taking a peek, according to a source. The companies declined to comment.
General Electric, one of the world’s largest corporations, appears to be shrinking away from consumer finance in much of the developed world in the wake of the subprime mortgage crisis.
Among its Canadian lines of business is an alternative mortgage lender that was the first in Canada to offer a 40-year mortgage.
It also has four other business lines: credit card programs for retailers; retail financing; personal loans for recreational equipment; and a health care financing business called CareCredit that offers payment plan options to individuals for dental, health care and veterinary expenses.
It’s not the only lender in Canada to consider selling assets as the credit crisis evolves.
Toronto-based Xceed Mortgage Corp. is also a potential takeover target, sources say. Late yesterday, the firm announced that it is cutting 74 jobs.
The Xceed job losses include some senior executives, and the firm is shrinking its office space as it works to manage the roughly $2.5-billion (Canadian) of mortgages and other assets it administers. The moves should help the company return to profitability in the third quarter, it said.
Earlier, Xceed declined to say whether it had been approached by suitors. But a company spokesman said it would be surprising if investors of one kind or another weren’t looking at it, when you consider it is trading at a little over $1 a share, down from $7.99 in April.
GE, meanwhile, would not comment on whether it has put Canadian assets on the block.
Connecticut-based GE Money spokesman Robert Rendine said the company does not comment on rumour or speculation.
TD Bank, possibly through its subsidiary VFC Inc., an automotive and consumer financing company, is among those sniffing around some of GE Money Canada’s businesses, according to a source.
TD Bank spokesman Simon Townsend said the bank does not comment on speculation. “It’s normal for us to look at our options on an ongoing basis,” he added.
VFC Inc. chief executive officer Erik de Witte could not be reached for comment.
As credit crunch dominoes topple financial service victims, the investment community had raised some concerns about General Electric’s financing businesses, which accounted for more than one-third of its profit last year.
The company sold its U.S. mortgage business in December for $117-million (U.S.) in cash, taking a loss on it, after deciding in July to get away from the subprime business there. It had dumped $3.7-billion of its subprime mortgage portfolio.
Earlier this month, India’s The Economic Times reported that GE Money and its advisers Morgan Stanley would soon be meeting with short-listed bidders for the personal loans and mortgage business there.
The first deal the parent company announced yesterday, worth more than $1.5-billion, is a swap with Spain’s Banco Santander, which will buy GE Money’s businesses in Germany, Finland and Austria, and its card and auto businesses in Britain. Another GE division, Commercial Finance , will pick up Italian bank Interbanca from Banco Santander.
The deal will allow GE to take some assets from consumer finance and put them into the higher-growth area of commercial finance, a spokesman said.
The second deal will see American Express pick up GE Money’s commercial card and corporate purchasing business unit, Corporate Payment Services, for $1.1-billion in cash.
GE Money’s Mr. Rendine said in an e-mail the current global strategy is “to ensure that our portfolio is optimized” and noted that the asset sales are only one side of the equation. “We’re also investing heavily in the business,” he said, especially focusing on emerging markets.
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