Bank of Montreal said Thursday it had agreed to acquire General Electric Capital Corp.’s transportation-finance business operations in a multi-billion-dollar deal, bolstering its commercial-banking business and expanding its U.S. footprint.
The purchase price wasn’t disclosed, though BMO said the business being acquired had net earning assets of about $8.7 billion at June 30 and that the final price would be based on the value of those assets at closing, plus an unspecified premium. BMO, Canada’s fourth-largest bank by assets, said it would use its balance sheet to fund the acquisition, adding that it wouldn’t issue any common shares in the deal.
The move comes as Canada’s big banks look abroad for expansion to help offset slowing growth in their key domestic banking markets.
“Our strong capital position provides us with the flexibility to complete this acquisition, which is consistent with our strategy and well-aligned with our risk profile,” BMO Chief Executive Bill Downe said in a statement.
For GE, the sale is part of a stated plan to sell most of the $500 billion of assets in its GE Capital financing unit. The conglomerate is largely getting out of the banking business at the urging of investors to return to its industrial roots amid market conditions and federal regulations that have weighed on the finance unit’s returns.
In June, GE announced a deal to sell its U.S., Mexico, Australia and New Zealand fleet businesses for $6.9 billion to Canada’s Element Financial Corp. The business provides commercial car- and truck-financing and fleet-management services. That month GE also agreed to sell its private-equity-lending unit to Canada Pension Plan Investment Board, Canada’s largest pension fund, in a deal valued at $12 billion.
“We continue to execute on our asset sales and are on track to reduce our ending net investment by $100 billion by the end of 2015 and expect to be substantially done with our exit strategy by the end of 2016,” Keith Sherin, chief executive of GE Capital, said in a separate statement.
BMO has a solid presence in the U.S. Midwest, where it owns Chicago-based BMO Harris Bank N.A. Its last big acquisition in the U.S. was in 2010, when it acquired Marshall & Ilsley Corp. of Milwaukee in a $4.1 billion stock swap and combined the company with its Harris Bank operations.
BMO said the GE business it is acquiring is based in Irving, Texas, and is the largest North American financier to the commercial truck and trailer segment. The business operates out of 11 locations in the U.S. and four in Canada and employs about 600 people.
It said the deal would immediately boost earnings and broaden its commercial customer base.
The deal is expected to close in BMO’s fiscal first quarter, which will end Jan. 31, 2016.
Source - The Wall Street Journal
Original Article - http://www.wsj.com/articles/bank-of-montreal-to-buy-ge-capitals-transportation-finance-unit-1441919538