GE Capital, the financial arm of General Electric Co. is set to sell its $2 billion dollar Mexican assets portfolio to Spain’s Grupo Santander for $162 million and exit the business in the country. Santander will additionally assume the debts of GE Capital in Mexico.
Under the deal, Grupo Financiero Santander Mexico will acquire all consumer mortgage related business of GE Capital in Mexico, including GE’s $2 billion consumer mortgage portfolio. The transaction will be completed by first half of 2011.
GE Capital’s Mark Begor – Chief Executive of restructuring operations said the company will continue focusing on core operations and will shed its non-core assets. “This sale is consistent with our strategy to exit non-strategic businesses that lack scale to help reduce GE Capital’s balance sheet while investing in core industrial and commercial finance platforms, including in Mexico”, he said.
Santander will become the second largest mortgage provider in Mexico after the deal, said Marcos Martinez Gavica, executive vice president of Grupo Financiero Santander. ““This acquisition is evidence of Santander’s confidence in Mexico, and is consistent with Santander’s strategy in Mexico of investing in the strengthening of our franchise, investing in the country, and the implementation of strategies that would allow us to continue growing in this market”, he added.
GE Capital has been dealing in both Residential and Commercial Mortgages in Mexico since 2002. The mortgage unit was brought under restructuring operations in early 2009.
GE Capital said it will still continue its business in technology and structured finance, working capital funding, transportation, commercial real estate and equipment and aircraft financing.
Top GE Capital executives said that they have disposed of financial assets worth $14 billion in 2010 and plans to liquidate another $17 billion worth assets in 2011 in an effort to make the balance sheet smaller. The aim is to expand GE Corp’s engineering & industrial business and shrink the financial division so that GE Capital’s contribution to the group’s net profit comes down to 30% from the present 50%.
Jack Immelt, GE’s Chairman and Chief Executive said in an investor meet this month: “there’s some well-known pieces of GE Capital that will be disposition candidates or run-off candidates”.
GE’s share prices are down by 56% on a net basis since 2001, when Mr. Immelt had taken over as CEO. However, the share prices have grown by 19% this year alone.