Bank of Montreal to Acquire GE’s Transport Finance Unit
The Bank of Montreal, the fourth biggest lender in Canada, has decided to purchase General Electric’s (GE) transport finance business in Canada and the US.
According to the bank, which is based in Toronto, the net earning assets of GE’s transport finance unit are worth around C$11.5 billion or $8.7 billion as of June 30. The bank’s official website states that the unit’s employees and management team will become a part of Bank of Montreal.
The bank began expanding into the US in 1984 by its purchase of Harris Bank, which is based in Chicago. In July 2011, the bank acquired Marshall and Ilsley Corp., which is based in Milwaukee, and this acquisition helped it double the number of its branches as well as its deposits in Midwestern US.
Commenting on the bank’s move to acquire GE’s transport finance unit, William Downe, the chief executive officer of Bank of Montreal, said:
This acquisition builds on our position as a market leader in commercial banking in both the United States and Canada. The transportation finance business has many of the characteristics of other segments in which BMO has proven capability.
By this acquisition, the Bank of Montreal is getting the biggest financier of the commercial trailer and truck industry of North America. Around 83 percent of the unit’s assets are in the form of loans and 17 percent are in the form of leases. About 90% of the unit’s portfolio is based in the US while the rest of it is based in Canada. The company, which has its headquarters at Irving in Texas, has four offices in Canada and 11 in the US.
The bank says that it will pay an amount based on “net earning assets balance on closing, plus a premium.” By the time the two companies close their acquisition deal at the end of Jan 2016, the company’s assets may increase by C$1 billion.
GE began selling its lending assets worth $200 billion after Jeffrey Immelt, its chief executive officer, retired. After selling off most of GE Capital, the company plans to concentrate on its industrial operations, which includes the production of oilfield equipment, medical scanners, and jet engines.
In August, Capital One Financial Corp. purchased GE’s healthcare finance unit for $9 billion while Goldman Sachs Group Inc. purchased its online bank. Goldman Sachs and Credit Suisse Group AG were GE’s financial advisors while Shearman and Sterling LLP was the firm’s legal advisor.
