GE will exit most of its finance business. selling the bulk of its real estate assets for $26.5 billion. And it'll buy back up to $50 bln. in shares. Fred Katayama reports.
Mammoth makeover at GE. General Electric will sell most of its finance unit that once produced half of its profit, GE Capital. It aims to do that over two years. As part of the exit from finance, it's selling the bulk of its real estate holdings to Blackstone, Wells Fargo and other investors for $26.5 billion. The company will also buy back shares worth up to a whopping $50 billion. It's all part of CEO Jeff Immelt's plan to focus on its industrial businesses like jet engines, generators, and oil field equipment. He wants industrial businesses to pump out more than 90 percent of its earnings by 2018, up from 58 percent now. The finance unit got slammed after the financial crisis of 2008, and GE wants to free itself of the regulatory requirements that resulted from it. GE's stock rocketed higher on the announcement. The company has been under pressure from shareholders to boost its sluggish stock that has been weighed down by its exposure to finance. It's been vastly underperforming rivals like United Technologies and Honeywell over the last five years. Veteran GE watcher Nick Heymann of William Blair applauds the move. "It really accelerates the transformation of GE's portfolio into a vastly predominantly industrial business. This simplifies things a lot. I think investors will like it." GE still has a lot on its plate. It has to complete the sale of its appliances unit and purchase of Alstom's power business among other things. When it's all done, what's left of General Electric will be a lot less general and a lot more industrial.