General Electric (GE) will sell its private-equity lending unit to the Canadian Pension Plan Investment Board (CPPIB) in a deal valued at $12 billion. This deal is the first in the company’s effort, announced in April, to unload $100 billion of assets from GE Capital by the end of the year. The total assets of GE’s finance arm is a number that’s currently up for debate, but it’s estimated to be in the $300 to $500 billion range.
GE’s decision to sell of GE Capital was born of a desire to concentrate on the company’s roots: the business of manufacturing equipment for various industries. Jeff Immelt, GE’s CEO, says the company expects to generate 90 percent of its earnings from “high-value industries” such as aviation, energy, and healthcare equipment by 2018.
GE was formed in 1892 in a merger between Thomas Edison’s Edison General Electric Company and its competitor Thomas-Houston Company. The company’s name brings to mind washing machines and jokes on 30 Rock. GE Capital, GE’s “shadow bank,” started in the 1980s, and at one point contributed significantly to GE—some years as much as half of the company’s profits. However, this dependence on GE Capital became a problem following the financial crisis. Immelt’s decision to sell off GE Capital’s assets has been seen as “exorcising the financial demons” of his predecessor Jack Welch, who started GE Capital and has been criticized for GE’s dependence on GE Capital.