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GE

GE Continues to Divest; Inks Deals for Railcar Operations

Continuing to offload its financial assets at a whirlwind pace, General Electric CompanyGE inked two agreements to sell its railroad services operations that have been a part of GE Capital.

The conglomerate has decided to sell its tank car fleet assets and railcar repair facilities to Marmon Holdings Inc., a part of Berkshire Hathaway Inc. BRK.B . A part of the deal will close on Wednesday, and the rest is scheduled to close during the fourth quarter.

The leftover railcar leasing business - General Electric Railcar Services LLC - is being bought out by Wells Fargo & Company WFC . The transaction is expected to conclude in the first quarter of 2016.

Other details of the deals have been kept under wraps.

The transactions take apart what used to be a $4 billion asset business that leases freight and tank cars and offers loans and maintenance services.

The sales are part of a string of GE Capital divestitures, as CEO Jeff Immelt manoeuvres the conglomerate back to its industrial roots. He intends to split off about $200 billion of financial assets, while expanding manufacturing capabilities at the same time.

GE decided to trim down GE Capital, the parent unit of its real estate business, after the division's lack of access to credit during the 2008 financial crisis endangered the stability of the parent company.

Wells Fargo is working closely with GE, particularly for certain units of GE Capital's portfolio that fit perfectly with the bank's expertise. In fact, Wells Fargo and The Blackstone Group L.P. BX helped the industrial titan to get the ball rolling, by agreeing to buy real estate assets worth about $23 billion.

With the latest deals, GE's announced asset sales have reached $95 billion year-to-date, well ahead of its schedule. In fact, the company raised its 2015 target for GE Capital asset sales from $100 billion to a range of $120 billion to $150 million.

By and large, GE's sales of portfolios or business units have been selling at par or somewhat above par, as they are performing assets and not distressed. Also, there is significant demand for these assets from financial firms that have very few good buying opportunities.

GE presently carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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