Apollo to buy US$1 billion of energy investments from GE Capital

[NEW YORK] General Electric Co. agreed to sell about US$1 billion of equity investments to Apollo Global Management as the downtrodden manufacturer extends a push to slim down and shed finance assets following a surprise CEO change.

The portfolio includes about 20 investments in renewable energy and other US power assets held by the energy financial services unit of GE Capital, the companies said Monday in a joint statement. Financial details of the transaction, including the purchase price, weren't disclosed.

The deal, GE's first since tapping Larry Culp last week to replace chief executive officer John Flannery, underscores GE's efforts to rein in its once-vast finance business and narrow its focus on manufacturing industrial equipment. The Boston-based company hopes reducing complexity will help it recover from a slump that has wiped out about US$100 billion in investor wealth over the past year.

For Apollo, the agreement reflects growing interest in energy investment by private-equity giants, including Blackstone Group and Carlyle Group. Along with energy investments in its general funds, Apollo recently raised US$3.5 billion for a natural resources fund.

GE rose 1.3 per cent to US$13.36 a share at 9.57 am in New York. The shares gained 17 per cent last week after the CEO change was announced, though GE was still down 24 per cent this year through Oct 5.

Apollo fell 1.1 per cent to US$33.47.

WHITTLED DOWN

Once one of the largest lending firms in the US, GE Capital has been whittled down since the financial crisis. Former CEO Jeffrey Immelt sought to exit most markets while keeping only the businesses that supported GE's manufacturing operations,such as jet leasing and the financing of gas turbines.

While the effort helped GE escape the US government's "too big to fail" designation, it still left the company with more than US$150 billion of assets. Under Mr Flannery, who took the helm in 2017, GE sought to unload even more of GE Capital, including a volatile insurance portfolio and about US$25 billion in assets from its energy and industrial finance operations.

Mr Culp has yet to lay out his strategy, but Bloomberg reported last week that purpose of the CEO swap was to speed up Mr Flannery's plan, not to change directions.

The agreement with Apollo "reflects ongoing progress" in the GE Capital strategy, Alec Burger, president of GE Capital, said in the statement.

The transaction, expected to close in the fourth quarter, may not be the last of its kind. GE and Apollo said they "will seek to form an ongoing relationship" to explore energy infrastructure investments in the future.

BLOOMBERG