GE is all set to lease their Capital Financing Business to a local company in Japan. Shinsei Bank and Sumitomo Mitsui Financial Group are the front runners as their bids are worth almost $5 billion.
General Electric (GE) is all set to lease their commercial-lending business in Japan to a local company there. As of now, we are looking at a $5 billion race. There are two active bidders as of now including Shinsei Bank and Sumitomo Mitsui. It’s been revealed by someone close to the business.
As of now, talks are on with these two companies. These two companies submitted their bids this month. As per the source, the bids are worth $5 billion.
GE has ambitious plans for a global expansion of their Capital financing business. That’s exactly why they put up their Japanese firm for sale this year. Since then several financial biggies in Japan expressed interest in buying the company. However, it must be noted that GE Acquired Some Other Companies in the Interim, Including Grid Business and Alstom Power, and you can read more about it here.
What about the two current front runners? Well, they have a history with GE as far as cutting deals are concerned. GE is scaling back their operations in the global finance sector as of now.
Let’s have a look at a couple of recent deals that GE made with Japanese financial firms. SMFG is the second largest bank (in terms of revenue) in Japan and they bought private-equity financing business arm of GEs European division back in July. That deal was closed at $2.2 billion. So, GE has already done it and they know what they are doing. Since they already have a deal, it should be easy for these two companies come up with a reasonable deal for both.
Now, speaking of Shinsei Bank, they also have done business with GE. They bought assets from GE already. Back in 2008, GE made a deal with $5.4 with the company. Back then GE sold its consumer-finance business to them. The company was forced to do this all thanks to the strict regulations from Japanese authorities.
As far as the auction process goes, GE has adopted a different style here. Usually when it comes to such deals, companies would select a preferred bidder and initiate talks with the bidder after evaluating their binding bid. But in the case of GE, they are conducting talks simultaneously with both the companies. The negotiations will continue with both the parties before GE chose to pick just one company. GE will be discussing specific terms of their agreement with both the parties. When can we expect the news? Well, we can expect to hear about the final deal within few weeks’ time as talks are happening in brisk pace.
An official statement came from GE saying that multiple bidders are part of the discussions. The official statement reiterated the competitive nature of the bids in question.
Did media spill some beans on the deal? Well, a couple of reports suggested that the company has made some progress when it comes to their talks with SMFG. But this can be merely speculative as of now. As of now, it would be smarter for us to stay away from speculation. As for the value of the company, both bids are close to $5 billion. We are talking about several divisions of the company here.