Canada's CPPIB to buy GE private equity lending arm for $12 billion

TORONTO (Reuters) - Canada Pension Plan Investment Board (CPPIB) said on Tuesday it has agreed to buy GE Capital’s private equity lending portfolio for $12 billion, in a deal that will greatly expand the largest Canadian pension fund’s lending business.

GE’s Antares unit is the leading lender to middle market private equity-backed transactions in the United States. In the past five years it has provided over $120 billion in financing.

“This provides us with a very unique opportunity to access the U.S. middle market space via a very attractive platform,” said Mark Jenkins, CPPIB’s global head of private investments.

GE’s retreat from lending and a broader move to reduce its exposure to its finance arm comes as U.S. regulators move to curb aggressive lending practices. GE announced plans in April to sell $200 billion worth of finance assets as it focuses on its industrial products business.

In a separate statement, GE said it plans to continue to run the Senior Secured Loan Program - a joint venture between affiliates of GE Capital and affiliates of Ares Capital; and its Middle Market Growth Program, a joint venture between affiliates of GE Capital and affiliates of Lone Star Funds; for a period of time to provide CPPIB the opportunity to work with both parties.

If CPPIB is unable to reach deals with both parties GE said it plans to wind down its investments in those two programs.

With this deal, GE said it has now finalized $55 billion worth of asset sales and it remains on track to complete roughly $100 billion worth of asset sales this year.

“This was the biggest thing we wanted to get done early and we did it in 60 days from a standing start,” said GE Capital’s head, Keith Sherin, adding he stood by GE’s rough target for agreements for $20 billion to $30 billion in finance asset sales by the end of the month.

GE and CPPIB expect the deal to close in the third quarter, pending regulatory approvals. JPMorgan Securities and Citigroup advised GE on this transaction, while Credit Suisse and Morgan Stanley acted as CPPIB’s advisors.

CPPIB has invested over $16 billion in leveraged loans, high yield bonds, and mezzanine financings since 2009. This deal solidifies its foray into the lending sphere as it looks for investment opportunities for its roughly C$264 billion ($213.37 billion) in assets under management.

Additional reporting by Lewis Krauskopf; Editing by Andrew Hay and W Simon