GE financial services unit may be valued at more than $20 bln in IPO: FT

Ed Crooks and Camilla Hall

General Electric has confirmed plans to spin off its North American retail financial services business as a separate company, starting with an initial public offering next year.

An IPO could value the unit at more than $20 billion.

The spin-off, which would take GE out of consumer finance in North America, is intended to be the industrial group's last large-scale disposal under a restructuring to sharpen its focus on manufacturing operations.

Jeff Immelt, chief executive, aims to cut GE's reliance on financial services earnings, and to concentrate on commercial lending. Mr Immelt said in May that the group was looking at a possible spin-off of the consumer finance unit.

In a filing with the Securities and Exchange Commission, the US regulator, on Friday, GE said it planned to sell up to 20 percent of the business in the IPO in 2014, and then separate it off completely through a share distribution to its investors in 2015.

(Read more: Investors expect many tech IPOs next year)

The business includes private label credit cards issued by retailers, other types of store credit and car loans. It had assets of $53bn at the end of the third quarter, and is expected to make net income of about $2.2bn this year.

GE said that under listing rules, it was not able to give any guidance on the value of the business to be spun off.

However, Discover Financial Services, a US credit card company seen by analysts as the closest comparator to GE's North American retail financial services business, made $2.4 billion in net income last year and has a market capitalisation of about $25 billion, suggesting that the new company created by the IPO could be valued at about $23 billion.

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In its filing, GE also said that before the planned spin-off in 2015, it could sell part or all of its holding in the unit.

GE Capital, the financial services division, has generated much of the group's growth both before and after the financial crisis, but suffered large losses during 2008-09 that forced GE to cut its dividend and lost the group its triple A credit rating.

Investors now generally value financial services earnings less than profits from GE's more stable manufacturing operations.

The financial services businesses also face tighter regulation, and have had their credit rating cut by agencies.

Mr Immelt wants to cut GE's reliance on financial services earnings from about 45 per cent of the group's total last year to about 30 per cent.

Keith Sherin, who took over as chief executive of GE Capital in July, said in a presentation for analysts and investors that the division was "still going to be an important part of the company".

He said GE Capital would focus on its core activities, including lending to middle-market businesses and supporting equipment sales by GE's manufacturing operations such as power generation equipment and aero engines.

Mr Sherin said it was "a good time to exit this [US retail] business". He added: "The capital markets are pretty strong."

GE shares rose 0.9 percent after the announcement to $27.24.