GE share price down, agrees to sell healthcare finance business to Capital One

General Electric Co said on Tuesday it has agreed to sell its healthcare finance unit to Capital One Financial Corp for about $9 billion as the conglomerate winds down its finance operations and shifts focus back to its industrial roots.

Under the deal, Capital One, a tier-two bank that has rapidly expanded since the global financial crisis on the back of global banks being strategically overhauled and heavily scrutinized, will acquire GEs healthcare-related loans worth $8.5 billion, transforming it into one of the big players in the segment. GE Capitals healthcare lending business provides financing to healthcare products and services companies, as well as real estate loans to operators of assisted living facilities, nursing homes and medical practices.

“This is a strategic investment in a specialty industry segment that we have been building out for the past several years,” said Michael Slocum, president of Capital One’s commercial banking unit. “This addition will catapult us to a leading market position in providing financial services to the healthcare sector.”

As for GE, the deal, which is expected to be finalized in the fourth quarter, is the latest step in achieving its goal to shed about $100 billion worth of finance assets by the end of the year, bringing the total sold so far to roughly $78 billion. The ultimate objective for the conglomerate is to slash GE Capitals ending net investment, its measure of assets, by $200 billion by the end of 2016.

The size of GE Capital and the potential risk stemming from its lending portfolio have earned it the designation of a systemically important financial institution and GE plans to apply next year to escape the designation following the finance arms shedding. Tougher regulatory requirements in response to the 2008 crisis, including higher capital ratios and curbs on risky loans, have made running GE Capital less profitable.

Investors have urged the conglomerate to return to its industrial roots as tougher regulatory oversight and difficult market conditions have weighed on margins, and GE Chief Executive Jeff Immelt addressed those calls in April when he said the company would dispose of most of its financial services operations. GE agreed the same month to sell $26.5 billion worth of real estate assets to Blackstone Group LP, Wells Fargo & Co and other buyers, and in June it agreed to sell its private equity lending unit for $12 billion to Canada Pension Plan Investment Board.

GE said it will keep financing businesses connected to its industrial operations but it still has to sell most of its international and US commercial lending operations, as well as its global consumer business. It also said on Tuesday it is selling $600 million of the healthcare financing units real estate equity investments to an unnamed buyer.

General Electric Co settled 2.02% lower at $25.71 in New York on Tuesday, marking a year-on-year drop of 0.3% and valuing the company at $259.58 billion. Shares tumbled 1.21% to $25.40 by 08:44 GMT in pre-market trading on Wednesday. According to CNN Money, the 13 analysts offering 12-month price forecasts for General Electric have a median target of $30.00, with a high estimate of $33.00 and a low estimate of $27.00. The median estimate represents a +16.69% increase from the last price of $25.71.