Private Equity-Led Consortium Buys Australian Finance Unit


March 16, 2015

The consumer-lending arm of GE Capital Australia has been sold to a consortium led by private equity firm KKR. The financial unit, which is operating in Australia and New Zealand, provides personal loans, credit cards and interest-free retail finance services. The deal’s value stood at $6.3 billion.


Consortium of Financial Giants
The consortium is led by the US-based private equity firm KKR, but it includes other notable financial giants. Other firms include Deutsche Bank and Varde Partners, an international alternative investment manager. Furthermore, there was plenty of interest for the GE Capital unit. Financial Times reported on Sunday that private equity firms such as TPG, Blackstone and Apollo Global Management were among the firms bidding for the unit. It is also thought other financial firms like Liberty Financial tried to acquire the unit.


GE Capital appointed Credit Suisse and Morgan Stanley to look into the possibility of sale at the end of last year. The consortium’s bid received advice from Bank of America Merrill Lynch, Moelis and Citi. According to Reuters, GE Capital’s financial unit will continue to expand its mid-market lending portfolio in the region.


GE Capital Is Streamlining Its Operations
For GE the sale was about streamlining its operations in Australia and New Zealand. In the official statement, Geoff Culbert, the president and CEO of GE Australia and New Zealand, said, “This transaction allows us to focus on our strategy to be the world’s premier infrastructure technology company with a specialty commercial financial services business.”


The company has been looking to shed off its credit business ever since the financial crash in 2008. Bloomberg wrote on Sunday that the company’s industrial unit already accounts for nearly 70% of the revenue. According to sources, the Australian finance unit sold in the deal has currently around A$7 billion of gross assets.


Furthermore, it isn’t only Australia and New Zealand’s financial units that have been sold in recent months. GE recently sold its stake in a North American lending unit through an initial public offering. The Australian speculated the company is set to “reduce GE Capital’s share of the broader company’s profit to 25 per cent next year, from 42 per cent last year”.


Largest Private Equity Transaction
The consortium-led deal is among Australia’s biggest private equity transactions. Ed Bostock, director of KKR Australia, said in the official statement, “GE Capital is one of the most respected providers of consumer finance in Australasia. They are led by a strong management team with an outstanding track record of partnering with the leading retailers.” Other members of the consortium shared the same sentiment.


Reuters speculated the 3 million customers in Australia and New Zealand were a big incentive for financial firms to bid for the unit. The financial unit also has plenty of respected retail customers in both countries. For instance, retail business Harvey Norman is among the customers. The deal is still subject to regulatory approval, which some experts believe could take a while to sort out.


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