GE Healthcare Sells Lending Biz for $9 Billion

Capital One Financial Corp. has decided to buy GE Healthcare's financing operations, setting a new path for the lending company while helping return GE Healthcare to its medtech manufacturing roots.

Brian Buntz

The diversified conglomerate GE wants to shift its focus back to manufacturing, and is in the process of dismantling its $200 billion financial business known as GE Capital, which proved to be a liability for the firm during the Great Recession.

The company's GE Healthcare division is falling in line with this strategy, and is selling off its healthcare lending business for $9 billion, which will significantly boost Capital One's healthcare investing business.  

The deal will include $8.5 billion worth of loans to medical device and pharmaceutical companies as well as developers of senior housing, medical office buildings, and hospitals.

Capital One plans to pay a 6% premium over the value of the loans to help increase its stake in the healthcare market, in which it had been a small player.

Earlier reports had stated that GE Healthcare's financing business was worth $10-11 billion, significantly less than the amount Capital One paid. The Wall Street Journal, however, quotes an unnamed GE spokesperson who states that approximately $2 billion of assets were withheld from the transaction.

GE Healthcare's financial arm had provided more than $2.5 billion in financing to more than 500 companies in the medical device and biopharma industries, according to its website.

Other bidders for the unit included Ares Management LP and Ventas Inc.

GE anticipates that its financial service business will be dissolved by the end of 2016, Keith Sherin, chairman and chief executive of GE Capital said in the WSJ article. In this quarter alone, GE Capital plans on selling off $23 billion of assets, Sherin said in a Bloomberg interview.

The GE Healthcare division is now under the leadership of John Flannery, who took the reins of the division from John Dineen last year.

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