GE buys most of Merrill Commercial Finance
As predicted by Leasing News on November 14, 2007, Merrill-Lynch has agreed to sell most of its commercial finance business to General Electric Company's finance arm for an undisclosed price to free up capital after sub-prime losses.
Merrill also announced it would boost its capital by raising up to $6.2 billion in a private placement with Singapore's Temasek Holdings and Davis Selected Advisers.
This most likely will put Merrill Lynch commercial finance people out on the street, as most likely is what is also happening with LaSalle National Leasing Corporation after Bank of American purchased LaSalle National Bank.
The sale of Merrill Lynch Capital's corporate, equipment, energy and healthcare finance units is expected to be completed in the first-quarter, the companies said today in a Business Wire statement. The deal will add more than $10 billion in assets to GE Capital.
In its press release, it would allow Merrill to redeploy about $1.3 billion into other parts of its business.
GE said the acquisition, for an undisclosed sum, will also add $5 billion in commitments to GE Capital Commercial Finance's base of $260 billion.
"These strong units fit perfectly with existing and very successful GE Capital businesses," Mike Neal, vice chairman of GE said.
GE Capital will buy Merrill Lynch Capital's corporate finance, equipment finance, franchise, energy and health care finance units. Merrill Lynch Capital's commercial real estate finance unit is not part of the transaction.
"This transaction reflects Merrill Lynch's continued strategic focus on divesting non-core assets and optimizing capital allocation, while also enabling the redeployment of approximately $1.3 billion of capital into other parts of our business," said John A. Thain, chairman and CEO of Merrill Lynch & Co. Inc., the parent company of Merrill Lynch Capital.
The deal is expected to close in the first quarter of 2008.
Merrill has been trying to raise capital to help bail it out of huge losses related to the sub-prime mortgage crisis. Merrill has already taken $7.9 billion of write-downs from bad bets on risky mortgage-backed securities. Global banks have written down an estimated $105 billion this year alone from exposure to mortgage-backed securities.
On Friday, Merrill's shares rose on a report that the nation's biggest brokerage is seeking a $5 billion investment from Singapore's state- owned investment agency Temasek Holdings.
GE Capital offers businesses around the globe an array of financial products and services. It's Commercial Finance unit has assets of over $260 billion and has its headquarters in Norwalk, Conn.
November 14, 2007 story
http://www.leasingnews.org/archives/No vember%202007/11-14- 07.htm#mlc