Capital One Financial Corp. agreed to buy General Electric Co.'s health-care finance unit for about $9 billion, as the bank best known for its credit cards builds a niche business into one of the industry's largest.
Capital One will acquire the operation and about $8.5 billion of health-care-related loans, the companies said Tuesday in statements. The Healthcare Financial Services unit, put on the market this year as GE unloads the bulk of its finance arm, provides mortgages and loans to companies including nursing homes.
Capital One Chief Executive Officer Richard Fairbank has expanded the credit-card consulting firm he founded more than two decades ago into a diversified lender that ranks as the seventh-largest commercial bank in the U.S. The transformation has been fueled by a spree of acquisitions that have included smaller businesses, such as energy investment banking and health-care lending.
"This addition will catapult us to a leading market position in providing financial services to the health-care sector," Michael Slocum, president of Capital One's commercial bank, said in its statement. "This is a strategic investment in a specialty industry segment that we have been building out for the past several years."
The deal ranks among Capital One's largest since the 2008 financial crisis. The McLean, Virginia-based company bought ING Direct USA for about $9 billion in 2012, building its deposit- taking bank into one of the largest online lenders in the nation.
Capital One will retain the health-care lender's employees and management team, including President Darren Alcus. Loans to that industry already made up about 5 percent of Capital One's commercial loans, according to company filings.
"This makes them a much more significant player going forward in the health-care business," said Jeff Davis, managing director for the financial-institutions group at Mercer Capital. "And what it does is further diversify their asset base, which is positive for both equity and debt investors."
Capital One rose less than 1 percent in extended trading at 5:30 p.m. in New York. The stock is down 2 percent this year.
GE CEO Jeffrey Immelt is accelerating his push to divest about $200 billion of GE Capital assets to focus on manufacturing. That's breaking up banking operations that imperiled the parent company during the financial crisis.
Tuesday's deal builds on GE's agreements last quarter to unload $23 billion of financial businesses, including the U.S. private-equity lending business sold to Canada Pension Plan Investment Board. Separately, GE said Tuesday that it reached a deal with an unidentified buyer to sell approximately $600 million of real estate equity investments.
The health-care transaction is expected to be completed in the fourth quarter, GE said. Citigroup Inc. and JPMorgan Chase & Co., provided financial advice to Fairfield, Connecticut-based GE, while Hogan Lovells US LLP served as legal adviser.
Credit Suisse Group AG and Wells Fargo & Co. were financial advisers to Capital One, and Wachtell Lipton Rosen & Katz provided legal advice.