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General Electric Catches IPO Fever, Spins Off Finance Unit

GE announced the much-anticipated spinoff of its finance unit


General Electric (GE) has filed for an IPO of its consumer lending unit. While the terms have not been disclosed, a deal is expected to bring in $3 billion to $4 billion.

General-Electric-GE-stockThe origins of the General Electric finance unit go back to 1932. Since then, it has turned into a juggernaut, with a massive business in the credit card industry. In 2013, the company financed $93.9 billion in sales, and there were $57.3 billion in loan receivables. In all, there were 62 million active accounts and the average FICO score was 714.

A key to the strategy for the General Electric finance business has been forging collaborations. Some of the notable private-label partners include Lowe’s (LOW), Walmart (WMT) and Amazon (AMZN). These partners have provided wide distribution for credit cards.

They have also provided for a highly profitable business. Last year, the net income for the General Electric finance unit came to $2 billion, or 3.5% of assets.

And there should be continued improvement. Let’s face it, consumer spending has been increasing because of the recovery in the U.S. According to the Nilson Report, the consumer payments industry is expected to grow by 25% from 2011 to 2016, reaching $10.4 trillion.

OK, then why an IPO? Well, General Electric is looking to focus more on other businesses like energy, infrastructure and industrial equipment. Besides, the banking business is now saddled with much more regulations and oversight because of the financial crisis. Such things are likely a huge distraction for GE management.

But the General Electric IPO won’t happen until fall at the earliest. And so far, there has been little impact on GE  stock, which is unchanged in today’s trading. Then again, the IPO filing was widely expected, so the news was likely baked into GE stock already.

General Electric IPO Details

  • Expected Offering Date: Fall 2014
  • Ticker: NYSE: SYF (the company will actually be renamed “Synchrony Financial”)
  • Lead Underwriters: Goldman Sachs (GS), J.P. Morgan (JPM), Citigroup (C), Morgan Stanley (MS), Barclays (BCS), Bank of America Merrill Lynch (BAC), Credit Suisse (CS) and Deutsche Bank Securities (DB).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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