GE Is Getting Its Retail Finance Ducks in a Row
General Electric (NYSE:GE) is putting pieces in place as it moves closer to spinning off its retail operations in an initial public offering, having recruited Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM) to serve as underwriters and lead the process. It’s expected to take place sometime within the next two months, the Financial Times reports.
The division provides private-label credit cards and other retail financial services, and is estimated to be worth some $20 billion. The company has voiced interest in floating about 20 percent of the entity this year, the Times says. The retail operations are a unit within GE Capital.
The company is remaining mute on potential valuations, but calculations from public information put the value at roughly $4 billion, making the potential listing one of the largest on the U.S. market since Facebook raised $16.1 billion in May 2012.
After the IPO, GE reportedly plans to distribute the remaining part of the unit via share distributions to investors next year.
GE has been long planning its exit and divesture from consumer finance as a part of a greater restructuring effort to put more emphasis on its core manufacturing business. General Electric is hoping to bank on the healthy climate for capital to the consumer lending sector; the Financial Times cited Santander Consumer, an auto loan provider, that raised $1.8 billion through an IPO after investor interest pushed it to up its offering size.
Likewise, former AIG property Springleaf has seen its shares climb about 41 percent since going public in October.
“The healthier funding environment for consumer finance firms reflects investors’ interest in increasing exposure to subprime lending,” analysts at Fitch told the Financial Times earlier this week, noting that “improvements in credit fundamentals and investors chasing higher yielding loans were driving the demand.” However, the firm cautioned that the sector was “vulnerable to volatility should macroeconomic trends weaken.”