GE fails to sell railcar unit again
General Electric Co (GE-N) has failed to auction off its railcar leasing business, making it the second time in three years the U.S. conglomerate has tried unsuccessfully to sell the unit worth roughly $3 billion US.
GE explored options for the unit but decided to keep it after seeing a pickup in demand for railcars and progress in selling off other parts of the GE Capital portfolio, GE Capital spokesman Russell Wilkerson said, confirming a Reuters report earlier Tuesday that the auction had been pulled.
"The environment has gotten better, the business has gotten better, the competitive landscape has gotten better," Wilkerson said. "It's a quality asset."
Sources familiar with the situation said financing the purchase of the unit, which drew mostly private equity bidders, was likely an issue, indicating that funding for such businesses remains challenging despite improved credit conditions.
Morgan Stanley, which was advising GE on the sale, had offered potential buyers partial financing to help purchase the unit, but the bidders were not comfortable with the terms, one source said.
GE put the business on the block earlier this year as part of its continuing effort to trim GE Capital. Chief Executive Jeff Immelt wants GE Capital to represent 30 to 40 percent of earnings, rather than the more than half it generated before the 2008 financial crisis.
GE's Wilkerson said the company moved the railcar business out of the pool of businesses within GE Capital that were to be restructured and back into GE Capital Americas, the unit headed by Dan Henson.
GE tried selling the business in 2008 as well, just as the financial crisis took hold. At the time, GATX Corp offered more than $3 billion for the unit, but it could not seal a deal because of financing problems.
This time around, the unit drew bids from several private equity firms, including a consortium of Warburg Pincus and TPG Capital, and Cerberus Capital Management and Apollo Management, people familiar with the matter told Reuters previously.
Others including Vestar Capital Partners and Greenbriar Equity Group, billionaire investors Carl Icahn and Wilbur Ross, and Australia's Macquarie Group had also been interested, the people said at that time.
Fairfield, Connecticut-based GE has been refocusing the company on its industrial businesses and over the last year struck deals worth more than $14 billion, most of them in energy infrastructure.
GE is also selling GE Seaco, a container leasing business, with Deutsche Bank AG advising on that sale.
HNA Group, China's fourth-largest airline group, has emerged as a frontrunner to buy GE Seaco that could fetch $2.5 billion to $3 billion including debt, the Financial Times reported last week. The report named private equity firm Kelso & Co as another contender.