KETTERING, OHIO—In a move that expands the credit pool from its current roster of 215,000 small to mid-sized retail customers, GE Capital acquired sales finance portfolios from Citi Retail Partner Cards, including its flooring portfolio. The Citi portfolio acquisitions include nearly three-dozen retail partner relationships that collectively represent more than 18,000 small to mid-sized Main Street merchant locations across the U.S., and is valued at a total of $1.6 billion.
“This acquisition is right in line with GE’s goal to invest in core, high performing growth businesses where we have deep experience and broad capabilities to grow,” said Mark Begor, president and CEO of GE Capital Retail Finance. “Sales Finance is core to GE Capital and has delivered great results, even through the economic downturn. This strategic transaction, which we expect to be immediately accretive, makes a great deal of sense for GE Capital, adding high-quality assets and merchant relationships to what has been a core growth business for us for decades.”
Under terms of the agreement, Citi will provide interim servicing until GE Capital Sales Finance completes the conversion of merchants and cardholder accounts to its own system. In addition to flooring, consumer financing programs and related services will be provided for home furnishings, consumer electronics and heating, and ventilation and air conditioning. Financial terms of the transaction, which has already been approved by regulators, were not disclosed.
The transaction was described by executives at Citi as a sale of select programs to streamline the company’s strategic operating model, including bank legal vehicles and operating platforms for Retail Partner Cards business.
“The timing was opportune for Citi in that the streamlining of the business helps position us for growth by focusing our systems development and management resources on one platform,” said Elizabeth Fogarty, director of public affairs, Citi. “And just to reiterate, the transaction is a sale of assets only and does not include people, legal vehicles or operating platforms.”
The timing was right at GE Capital, too. “Now, more than ever, retailers and their customers want the attractive financing options we provide. Our programs help drive business and enable consumers to budget and pay for purchases over time,” said Glenn Marino, president and CEO of GE Capital’s Sales Finance business. “This acquisition broadens our relationships with retailers in segments where we have done quite well and have the expertise to manage and smartly grow.”
A decline in consumer credit delinquencies is a promising development in the midst of high unemployment, and encourages lending houses. Changes in consumer behaviors have also advocated private label credit lines, Marino said. End users have learned to compartmentalize their spending over the last few years and are managing their wallets differently. It behooves the industry to offer specialized programs that let buyers separate their floor covering purchase in a unique credit profile from other purchasing activities.
More than 20 years issuing private label credit has GE Capital committed to this credit niche in the market. “That is why we bought Citi,” Marino finished. “We have a positive view on the future, the credit environment and our economic future.”