GE Capital to Acquire CitiCapital
One GE Capital source expects significant layoffs within CitiCapital
April 17, 2008
GE Capital announced the acquisition of a majority stake in CitiCapital, Citigroup's North American commercial lending and leasing business.
GE Capital will be adding seven equipment business lines through the transaction, including Healthcare Finance, Private Label Equipment Finance, Material Handling Finance, Franchise Finance, Construction Equipment Finance, Bankers Leasing and CitiCapital Canada. The exception in the acquisition is CitiCapital’s Tax Exempt Finance business, which will remain with Citi.
The all-cash transaction is expected to close by the third quarter. Terms of the acquisition were not disclosed.
The two financial service firms have each suffered significant losses over the past quarter. Citigroup suffered a $9.83 billion quarterly loss this week alone.
A Citigroup representative told MergersUnleashed, “We have agreed to the transaction for a few reasons. It will allow us to redeploy approximately $1 billion in capital, and while it’s a great business, it is not core to Citi’s operations.”
A representative for GE Capital described that buy as “a winning combination” because “it’s a business that we know thoroughly and know how to grow.”
A source at GE Capital predicts that this acquisition will lead to significant layoffs. The GE Capital representative did not comment directly on this report, but stated, “We see some nice efficiency opportunities that we will take advantage of.”
In January, when Citi announced its fourth-quarter earnings, Vikram Pandit, Citigroup’s CEO, stated Citigroup would keep “a tight control over business risks. We are taking several steps to strengthen our capital base, including … our continued focus on divesting non-core assets and business.”
-Jessica Papini contributed to this report.
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