Last week, Reuters broke the news that Capital One Financial Corp. is in exclusive talks to buy General Electric (GE) Co.’s healthcare finance unit for a price that could exceed $10 billion. Although there appeared to be other potential buyers in the running earlier this summer, Capital One appears to have outbid them at auction and a deal is now being finalized.
For Capital One, the addition of the GE healthcare finance unit could help to enhance its healthcare lending business. Under its healthcare umbrella, Capital One currently offers term loans, as well as revolving lines of credit, to a wide variety of healthcare organizations, including acute care hospitals, skilled nursing facilities, physician practices, outpatient surgery centers and others.
The GE healthcare finance unit that’s up for sale offers direct loans to healthcare service providers and product manufacturers. It also offers real-estate loans for senior housing, skilled nursing facilities and other medical organizations.
As negotiations continue, both sides have declined to comment. "As a matter of practice, we do not comment on market rumors or speculation,” Capital One said in a statement. “As disclosed in our SEC filings, the company has every intention to fully deliver on our approved capital distribution plan."
The Wall Street Journal notes that GE owns a second healthcare unit that it intends to keep. That one is a division of its equipment finance business, which finances medical equipment purchased by clinics and hospitals. Most of the equipment financed by that unit is GE’s own scanners and MRI machines.
GE is in the process of switching its focus away from finance and back to its industrial operations, which include manufacturing of gas turbines and oilfield equipment. As a result, the company plans to sell off most of GE Capital’s assets over the next few years. “This is a major step in our strategy to focus GE around its competitive advantages,” GE Chairman and CEO Jeff Immelt said in a news release.
“GE today is a premier industrial and technology company with businesses in essential infrastructure industries. These businesses are leaders in technology, the Industrial Internet and advanced manufacturing. They are well-positioned in growth markets and are delivering superior customer outcomes, while achieving higher margins. They will be paired with a smaller GE Capital, whose businesses are aligned with GE’s industrial growth," he said.
In addition to the proposed deal with Capital One, GE has already made great strides toward its goal of divesting itself of the bulk of GE Capital’s assets. According to Reuters, the company has already made deals to sell around $26 billion in real estate assets to Wells Fargo & Co and Blackstone and to sell its private equity lending portfolio for $12 million to Canada Pension Plan Investment Board. GE has also already sold its vehicle fleet management arm in the United States, Mexico, Australia and New Zealand to Canada's Element Financial for $6.9 billion.