GE powers ahead in race for Investec asset

The field for Investec's $2.5 billion in assets is down to three bidders, and General Electric seems to be edging ahead.

General Electric is believed to be in the box seat to buy the Australian asset finance business of the South African-based investment bank Investec.

It comes as the competition for the larger part of the offering — the $2.5 billion-plus loan book and professional finance business — narrows to a field of three — Bank of Queensland, Bendigo Bank and ANZ, according to sources close to the company.

The asset finance business that GE is vying for is thought to be a smaller part of what is up for sale, with loans on smaller ticket items estimated to be worth less than $500m collectively.

While it is unclear what the asking price was for the asset finance arm, it was thought by one analyst that GE would not be outlaying more than $100m.

GE Capital is the financial services unit of US-based conglomerate General Electric and provides commercial lending and leasing, as well as a range of financial services for various other sectors such as healthcare, media and real estate.

Most of GE Capital’s commercial loans are too small and mid-sized companies, with 70 per cent under $100m. In 2009, it had $US551 billion ($590bn) of assets under management.

The business would be valuable to GE Capital because it would fit with its financing business and it would be keen to secure relationships with some of Investec’s clients.

“It is a reasonably higher returning business,” said an analyst.

The amount paid for the professional financing arm was thought to be far less than $1bn.

Some sources have speculated that a complete exit from Australia could be on the cards for Investec, although others have said it would be tough for the bank to withdraw from the market.

Greenhill was appointed in November to “identify alternatives” for Investec’s professional finance and asset finance and leasing divisions, including a sale, joint venture or continuing current operations.

Macquarie Group and Westpac were initial contenders to buy the professional finance business, but were no longer in the mix, sources said.

The professional finance unit is one of the leading lenders to doctors and dentists, employing 230 of Investec Australia’s staff of about 450.

Previously, the British and South African banking group had said it would transform its Australian business into a “boutique” operation to improve its returns.

If the financing businesses were sold, Investec Australia, which has a high-profile board chaired by Future Fund chairman David Gonski, will focus on corporate advisory, property funds, providing finance to various sectors and financial markets.

Investec was believed to be trying to complete a sale including staff. It has total loans before securitisation of $3.5bn.

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