General Electric will likely pick rival lender Acom as preferred bidder for its Japanese consumer loan business, paving the way for a $2.9 billion deal to create the country's biggest industry player, the Yomiuri paper said, sending Acom's shares to eight-month highs.
GE was expected to grant priority negotiating rights to one bidder by the end of this month, and Acom was seen grabbing the rights with a 300 billion yen ($2.9 billion) bid, the paper said on Tuesday.
GE is selling Lake in a harsh market after the government cut maximum interest rates and moneylenders were ordered to repay previous charges deemed to be illegally high.
The tougher regulation has pushed many Japanese consumer finance firms into the red and accelerated an industry shake-up, but some Japanese lenders see this as an opportunity to boost market share.
Another consumer finance firm, Promise is also in the running, sources have told Reuters, while the Yomiuri said mid-size lender Shinsei Bank was in the final round of bidding for the GE unit as well.
A spokeswoman from GE Consumer Finance, a financing unit of U.S. conglomerate General Electric, declined to comment saying "We do not comment on market rumors or speculation."
But the spokeswoman, who declined to be named, that the company was in talks with potential buyers and aimed to complete the sale by the end of September, as scheduled.
Acom spokesman Yoshimichi Yamada said there was nothing he could discuss about the reported deal.
Shares of Acom climbed 2.2 percent to 3,320 yen, their highest level since September 5.
GE Consumer Finance, which offers credit card, mortgage loan and insurance businesses, has total lending of 860 billion yen.
If GE sells Lake to Acom, the combined lender would have total assets of more than 2 trillion yen, becoming the biggest consumer financing firm in Japan, the Yomiuri said.
Hit by the tougher regulation and fierce competition, Japan's consumer finance market has shrunk 14 percent to 9.5 trillion yen at the end of March, from 11 trillion yen at the end of 2006, according to the Japan Consumer Finance Association.
GE said last year it expected to book a loss of up to $1.1 billion related to exiting the business.