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General Electric (NYSE: GE) and Merrill Lynch (NYSE: MER) announced a deal Monday, which will result in GE picking up most of Merrill's commercial finance business.The deal is expected to be completed during the first quarter of 2008, and will add an estimated $10 billion plus in assets to GE Capital. Merrill has been hit pretty hard this year with the subprime mortgage mess, and this deal will result in around $1.3 billion worth of capital that the company will be able to allocate elsewhere.
Merrill, which announced a massive $8.4 billion worth of write downs back in October is in the middle of what it is calling a "strategic focus on divesting non-core assets." This sale is beneficial to Merrill because the firm's commercial-lending business has become reliant on companies that do not posses investment-grade credit ratings and pose a financial risk that Merrill does not need to be assuming, especially after Merrill's recent write down.
Included in this deal will be Merrill Lynch Capital's corporate, equipment, energy and healthcare finance units. Merrill's commercial real estate finance unit, however, will not be included.
This was not the only piece of news today regarding Merrill Lynch announced on Monday. The company also announced that it would be getting a nice $6.2 billion cash infusion from Singapore's Temasek Holdings and Davis Selected Advisors LP.
In this other deal, Temasek will be laying out $5 billion for a less than 10% stake in the company, and Davis will be Advisors will be purchasing another $1.2 billion lot of the company's stock.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
3-06-2008 @ 1:42PM
Bill Dollar said...
Company XYZ is in the middle of what it is calling a "strategic focus on divesting non-core assets."
This is the new line hundreds of global financial companies and organizations will be using to try and save their sinking ship. Many will not make it!