Industrial conglomerate General Electric will spin off its consumer credit business with an initial public offering in New York in July that is set to be the biggest debut this year.
The company plans to sell 15 per cent of the company, to be called Synchrony Financial, and raise $3.1 billion U.S.
That values the division at $20.7 billion. The IPO appears set to top the $2.6-billion offering by auto financing company Ally Financial, formerly a division of General Motors, in April.
The remaining shares in Synchrony Financial are expected to be offered to GE shareholders sometime next year.
Synchrony issues store cards for retailers like JCPenney, Wal-Mart (in the U.S.) and the Gap. The unit issued Hudson's Bay Co. credit cards until 2010 when that portfolio was sold to American card issuer Capital One for $1.3 billion.
The spin-off is part of the company's efforts to refocus on its industrial activities, which range from wind turbine manufacturing to the sale of train locomotives, medical equipment and oil and gas drilling equipment.
The Synchrony IPO follows the sale of NBCUniversal, the owner of the NBC television network and filmmaker Universal Studios. NBCUniversal is now a division of U.S. cable giant Comcast.
The divestment of these two units is in line with CEO Jeff Immelt’s plan to boost GE’s earnings contribution from its industrial businesses to 75 per cent by 2016, from 55 per cent last year.
Bloomberg reported this week that Immelt is also seeking to sell its century-old household appliance and lighting business. That unit could fetch up to $2.5 billion, it said, citing unnamed sources.
Profit up, but lower than analysts expected
GE announced today that its net income rose 13 per cent in the second quarter on strong results from its aviation and oil and gas divisions.
The Fairfield, Connecticut-based company said orders, especially those from developing countries, were strong and that the global economic environment continues to be positive.
Second-quarter profit increased to $3.55 billion, or 35 cents per share, from $3.13 billion, or 30 cents per share, in the same quarter last year.
Earnings, adjusted for non-recurring costs and to account for discontinued operations, clocked in at 39 cents per share, matching the average per-share estimate of analysts surveyed by Zacks Investment Research. Revenue climbed 3.2 per cent to $36.23 billion from $35.12 billion in the same quarter a year ago, just shy of the $36.26 billion analysts had expected.
But revenue from the company's industrial segment — which excludes revenue from the finance division that the company is trying to shrink — rose seven per cent in the quarter compared with last year.
Profit from its industrial divisions rose nine per cent for the quarter. Oil and gas profit rose 25 per cent and aviation profit rose 12 per cent, though transportation fell 14 per cent.
GE is 'moving in the right direction': analyst
Christian Mayes, an analyst at Edward Jones, said the strong performance of the industrial divisions is what investors were hoping to see. "They are moving in the right direction," he said.
GE said that its $17-billion offer for the energy operations of France's Alstom, which was approved by Alstom's board and the French government in June, remains on track to close next year.
Shares were off nearly 1 per cent in trading at 3:00 p.m. Friday. GE shares have dropped $1.69, or 6 per cent, to $26.35 since the beginning of the year, trailing the Standard & Poor's 500 index, which has risen 5.9 per cent. However, the stock is up $2.71, or 11.4 per cent, in the last 12 months.