General Electric is to sell off much of its finance business during the next two years as part of a shake-up that it says will unlock a $90 billion return to shareholders.
The conglomerate plans to sell about $30 billion in real estate assets in the next two years as it seeks to focus on its dominant industrials division, saying that it had become harder to make acceptable profit from its financial services since the crisis.
The company is forecasting that its core industrial business will represent 90 per cent of profits by 2018, up from 58 per cent this year.
The pared-back finance division will only retain businesses that relate to the industrial unit, which manufactures technology and industrial equipment ranging from jet engines to power stations.
Wall Street welcomed the move, sending GE’s shares up 11 per cent last night, valuing the company at $266 billion.
Jeff Immelt, the chief executive, said: “We just think the market timing is very good vis-a-vis the value of financial service assets. There have been moments in the past when there weren’t a lot of buyers. Now there are.”
GE said that the restructuring would create a “simpler, more valuable” company, adding: “The business model for large, wholesale-funded financial companies has changed, making it increasingly difficult to generate acceptable returns.”
The company recently floated its retail finance business, Synchrony Financial, and hinted that the success of the move had encouraged it to be even bolder in off-loading its finance businesses.
The bulk of the property assets will be sold to Blackstone, the private equity investor, and Wells Fargo. In addition to the property business, GE plans to sell its commercial lending and leasing division and all of its consumer finance platforms. Together those businesses have a balance sheet value of about $200 billion, GE said.
The remaining finance business will be about a quarter of its present size.