Aegon NV, Europe's third-largest insurer, announced Tuesday that it had agreed to sell most of Transamerica Finance Corp.'s commercial finance business to a General Electric Co. unit for $1 billion in cash.
GE Commercial Finance of Stamford, Conn., is to assume $3.8 billion in debt and take over some leasing receivables, which would bring the proceeds for the Dutch company to $5.4 billion, Aegon group treasury head Bob McGraw said in a telephone interview.
Aegon, which is headquartered in The Hague, is seeking to free up capital because stock losses have eroded reserves. General Electric chief executive Jeffrey Immelt, meanwhile, wants to expand the Fairfield, Conn., company's consumer and commercial finance units to fuel growth.
The Transamerica deal would give GE a business with $8.5 billion of managed assets, including specialty finance units that provide leasing and commercial loans to manufacturers and technology companies.
Purchases announced or completed this year by General Electric total $9 billion. At the same time it is getting out of slower-growing businesses in an attempt to build its finance units; it announced Monday that it had agreed to sell its New York bond insurance unit Financial Guaranty Insurance Co. for $2.16 billion to a consortium led by the mortgage insurer PMI Group Inc. of Walnut Creek, Calif.
Aegon has been trying for four years to sell Transamerica Finance, a group of businesses it inherited when it bought Transamerica Corp. in 1999. Other European insurers including Allianz AG and Credit Suisse Group's Winterthur unit have sold assets recently to bolster capital.
"People who were worried about [Aegon's] balance sheet can now sleep better again," said Gert-Jan Geels, a fund manager at Eureffect BV in Amsterdam, which on Tuesday bought stock in the insurer.
Aegon said in Tuesday's press release that the deal is consistent with its "strategy to focus on its core business of life insurance, pensions, and related investment products." GE Commercial Finance said in its announcement that the deal is expected to close by yearend.
Aegon is to retain Transamerica Finance businesses including a ship container leasing division; a fleet of 19,000 trucks in Europe; and a real-estate services unit. Transamerica is based in San Francisco.
"There's still more to come" from Aegon, said Bart Horsten, an analyst at F. van Lanschot Bankiers, who has a "hold" recommendation on Aegon stock. "They'll sell more in the short term."
