Will MetLife and GE Benefit From This Purchase?
Though both MetLife (NYSE:MET) and General Electric (NYSE:GE) think the latter’s purchase of the former’s deposit business will strengthen their businesses and financial positions, investors haven’t yet swallowed that pill, to look at their share prices today.
As MetLife’s primary focus is on insurance and employee benefit operations, it was not crucial for MetLife to have business in retail banking and perhaps even useful to have the company de-registered as a bank holding company. MetLife’s Steven Kandarian emphasized the importance of exiting retail banking as it will allow more strategic focus on insurance and employee benefits.
MetLife’s garbage is GE’s treasure. For GE, the purchase of MetLife’s deposit business means $6.4 billion in bank deposits and less dependence on borrowing for GE Capital’s finance unit. The funding that will now be available to GE Capital will help with its lending business…
The purchase took more than two years to complete as the companies faced a roadblock in regulatory review. However, in September 2012, MetLife and GE arranged the deal so that it wouldn’t be subject to the Federal Deposit Insurance Corp.’s approval and would instead go through the Office of the Comptroller of the Currency. They received approval from the OCC in December and MetLife announced it had closed the sale Monday.
Despite what both MetLife and GE would suggest is good news, share prices are moving a little less favorably for GE. Since mid-December, when the OCC approved the purchase, GE’s shares have dropped from $22 a share to a minimum of just under $20 in late December and haven’t risen over $21.50 since. MetLife’s shares have behaved differently, with a slight dip toward the end of December but quick rise after that from almost $32 a share to about $36.50 a share. However, Monday morning, both companies were trading slightly below their previous close.
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