GE Capital to Buy Most of CitiCapital

Citi's commercial lending and leasing business agrees to sell seven finance lines to the GE arm.
By Debra Borchardt ,

GE Capital has inked a deal to acquire most of CitiCapital,

Citigroup's

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North American commercial lending and leasing business.

Financial terms of the all-cash transaction were not disclosed, but it's expected to close in the third quarter.

GE is acquiring seven equipment finance business lines from CitiCapital -- Healthcare Finance, Private Label Equipment Finance, Material Handling Finance, Franchise Finance, Construction Equipment Finance, Bankers Leasing and CitiCapital Canada.

The acquistion will add about $13.4 billion in assets to GE Capital's Commercial Finance business.

For Citi, the transaction is part of an effort to direct capital to core businesses and drive operational efficiency, the company said in its announcement Thursday. CitiCapital's Tax Exempt Finance business is not part of the transaction and will remain with Citi.

After losing nearly $10 billion in the fourth quarter, Citi has embarked on a plan to raise cash by selling stock and bonds, cutting its dividend and selling some of its businesses. GE also recently faced its demons when it reported a losing quarter on April 11 with much of the fault being leveled at the finance business. That admission prompted a 13% drop in the stock's price last Friday.

Mike Neal, GE's vice chairman, said in press release Thursday, "This acquisition represents another significant growth opportunity for GE -- one that helps us offer more to customers. CitiCapital is a well established franchise with experienced employees, broad capabilities and a terrific customer base. It's a business we know how to grow. We acquired and successfully integrated CitiCapital's Transportation Financial Services Group in 2005."

Yesterday, GE Capital sold $8.5 billion of debt in three parts. The sale included $2.5 billion of five-year notes priced to yield 2.05% more than comparable U.S. Treasuries; $4 billion of 10-year notes yielding 2.00% over Treasuries and $2 billion of 30-year bonds priced to yield 1.994% over Treasuries.

Shares of CitiGroup traded up 39 cents, or 1.7%, to $23.83 in recent trading Thursday, while

General Electric

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was trading down a slight 9 cents, or 0.3%, at $32.14.

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