GE unveils plan to offload Wizard
Date:2008/05/28 Source:
GENERAL Electric Co, selling consumer finance businesses after quarterly earnings fell for the first time in five years, may divest a mortgage unit in Australia.
The move has been prompted as loan growth slows after four interest-rate increases since last August, Bloomberg News reported.
The Fairfield, Connecticut-based company may sell Wizard home loans, move it into a joint venture or take on a partner to help run the company, Mike Cutter, GE Money's chief executive officer for Australia, told reporters on a conference call. Cutter didn't indicate what price he could fetch for Wizard, with 250 branches and loans of A$12 billion (US$11.5 billion).
GE Chief Executive Officer Jeffrey Immelt has sold units with annual sales of about US$50 billion and is exiting underperforming businesses to return to the company's long-term goal of 10-percent annual profit increases.
Australian home loan growth, at a decade high when GE bought Wizard in 2004, slumped to the slowest annual pace since 1998 in March as higher borrowing costs deterred home buyers. "The housing market is clearly under pressure," said Stephen Walters, chief economist at JPMorgan Chase & Co in Sydney. "It's the rate hikes, the cost of fuel, housing affordability."
GE never disclosed the purchase price of Wizard and its parent Australian Financial Investments Group.
Buyback hint
Insiders at the time put the price of the deal at US$300 million.
The franchise model used at Wizard branches sets it apart from the rest of GE so the unit may work better under a different owner, Cutter said.
Mark Bouris, Wizard's founder and chairman, may try to buy back the firm. Bouris, speaking on the call with Cutter, said he was helping GE with options and declined to say if he may take an ownership stake.
Immelt is building up GE's commercial finance business and selling some assets at the GE Money consumer unit, which together make the largest United States nonbank finance company.
He has put the Lake personal loans unit in Japan up for sale, while GE looks to emerging markets including China to help drive sales. He told shareholders on April 23 that about US$40 billion of the US$187 billion in the parent company's revenue forecast should come from such areas.
GE agreed to sell finance companies in Germany and the United Kingdom to Spain's Banco Santander SA in March in an asset swap valued at 1 billion euros (US$1.58 billion).
In April, GE posted a 12 percent decline in its first-quarter profit from continuing operations to US$4.36 billion. That's equivalent to 44 US cents a share.
The company cited financial market turmoil that cut the value of investments and thwarted end-of-quarter deal-making.
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