GE to Spin Off Credit Card Division
In an effort to minimize their financial risks, General Electric is going to create a separately traded company for its credit card division.
This new company will be worth an estimated $16 billion, approximately 6% of GE’s overall market value. As previously reported, an estimated 55 million store credit cards are financed through GE Capital, including cards for Walmart, Gap and Pep Boys.
GE is making this split so it can focus on its manufacturing processes, which is where the company made its name. At one point in time, GE’s financial sector represented nearly half of the company’s total profit, but the 2008 financial crisis threw those profits completely off course.
Once the spinoff is complete, GE Capital will be responsible for financing medical equipment and other costly products GE manufactures. GE Capital is the section of the company that houses financial operations.
GE has not named its new arm yet, but they expect to form it sometime next year. In 2015, GE will give current shareholders a chance to swap their GE stocks for shares of the new company.
They may also sell part of the company to investors or other companies who may be interested. They have attempted this before with their credit card business.
“This is the right business for GE to exit,” said Keith Sherin, head of GE Capital.