People walk out of a Commonwealth Bank of Australia branch in Sydney, Australia, August 12, 2015.
People walk out of a Commonwealth Bank of Australia branch in Sydney, Australia, August 12, 2015. Reuters/David Gray

GE Capital is in talks to sell its Australian commercial lending and leasing businesses. According to media reports, GE is holding talks with Sankaty Advisors and Deutsche Bank. The estimated book value of the business is about US$1.8 billion (AU$2.5 billion).

Deutsche Bank and Sankaty emerged as preferred final bidders for the private plane financing, equipment rental, working capital loans businesses of GE.

Negotiations were on for more than a week. The New York Times reported that in the event of a deal, Sankaty will manage the lending business while Deutsche Bank will provide the acquisition finance on the basis of a mutual deal. GE Capital auction is being managed by Morgan Stanley.

Lone Star in race

The other scenario will be if the talks collapse, then the American investment private equity Lone Star will purchase GE's Australian businesses. However, there was no reaction from GE, Sankaty, Deutsche Bank.

GE is hastening its retreat from financing business because of diminishing profitability and by the new focus on industrial and healthcare businesses.

General Electric has already auctioned out most of its financial assets in consumer lending and fleet-financing in Australia. The consumer lending business was sold to investment firm Varde Partners, Deutsche Bank and Kohlberg Kravis Roberts for US$6.3 billion (AU$8.8 billion).

The fleet-financing business in the United States, Mexico, Australia and New Zealand were sold in June. It was purchased by Element Financial Corporation of Canada for US$6.9 billion (AU$9.6 billion).

Renamed as Latitude

Meanwhile, GE Capital Finance, which was sold in March, has been renamed as Latitude Financial Services by the new owners. It offers personal loans, credit cards and retail finance. There is a customer base of more than 2.5 million customers.

Until recently, the consumer retail finance company was offering Harvey Norman's interest-free offers and Coles credit cards, reports The Sydney Morning Herald.

The new owners -- Värde Partners, Deutsche Bank and KKR -- said Sean Morrissey has been appointed the new CEO. He was GE executive since 2000 and was chairman of GE Money Bank in the Czech Republic.

“We are excited to have Sean join to head an already strong leadership team. Sean's established record of growing businesses, proven leadership capabilities and international experience will complement the local team's deep Australian and New Zealand market knowledge and capabilities,” said Ed Bostock, Director, KKR Australia, on behalf of the Consortium.

Varde, KKR and Deutsch won the bid to purchase GE Capital's Australian and NZ consumer finance division in March. They outbid the rival consortia led by Macquarie Group, which also had non-bank lender Pepper Group.

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