GE, in a move to become a pure play industrial company, is exiting the financial services business by selling the bulk of the assets contained in its GE Capital unit and returning most of the proceeds from that disposition to shareholders in the form of a $50 billion share buyback.
GE shares rose more than 8 percent in premarket trading. (Get the latest quote here.)
The company will take an after-tax $16 billion charge in the first quarter of 2015 in connection with the divestiture of GE Capital. Roughly $12 billion of that charge, which includes paying taxes on repatriated earnings, is non-cash.
GE said its intent is to create a "simpler, more valuable company" by effectively disposing of a unit whose assets are equal to that of the nation's seventh largest bank.
It will do that by selling units to other financial institutions as well as portfolios of assets, including Friday's sale of its commercial real estate assets for $26 billion. GE will sell most of the assets of GE Capital Real Estate to funds managed by Blackstone and Wells Fargo.
GE will keep the financial operations that help its customers finance their purchase of equipment from GE.
While the company has considered shedding GE Capital for a number of years, Chairman and CEO Jeff Immelt, in an interview with CNBC, said now was the ideal time.
"You really have a perfect market to be selling financial service assets, so you've got slow growth, low interest rates, lots of liquidity, people searching for yield," Immelt said. "We think it's good for the regulatory world, it's good for investors. And that's been more or less recent. Now's the time to do it."
GE expects to return more than $90 billion to investors through 2018. While parts of that return include the current dividend and the spin of its remaining 85 percent stake in Synchrony, the bulk will come in the form a $50 billion share repurchase program that will shrink its share count to as little as 8 billion by 2018.