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LONDON
AND BOSTON—GATX Corp., the Chicago-based lessor of
freight cars, is offering more than $3 billion for
General Electric Co.’s (GE) rail-services unit, people
familiar with the discussions said.
GATX is
the leading bidder for the unit, which has a book value
of about $2.8 billion, the people said. The terms are
still being negotiated, said the people, who asked not
to be identified because the discussions are private.
One said the offer may be as much as $3.5 billion.
Chief
executive officer Brian Kenney is building GATX’s rail
business after selling an aircraft-leasing division in
2006. At GE, whose stock has slumped 20 percent this
year, CEO Jeffrey Immelt is seeking to shed as much as
$100 billion in slower-growing finance assets such as
the rail-leasing division. During a July 24
teleconference, GATX’s Kenney said he’s seeking to
“invest more aggressively” during a financial slowdown.
“That’s
certainly what we prepared the company for over the last
couple of years,” said Kenney, 48, according to a
transcript of the July call.
Rhonda
Johnson, a spokesman for GATX, couldn’t be reached for
comment. Russell Wilkerson, a GE spokesman, declined to
comment.
Fairfield, Connecticut-based GE is the world’s biggest
maker of jet engines, locomotives, medical imaging
machines and power-generation equipment. GE’s web site
says the rail division leases about 165,000 railcars and
120,000 trailers, containers and chassis to rail lines
and shippers. The unit is based in Chicago and has
offices in Canada, the US and Mexico.
Immelt,
52, became CEO in 2001 and has since sold slower-growing
and capital-intensive businesses such as insurance and
plastics for more than $55 billion. At the same time, he
has made more than $80 billion in acquisitions in health
care, water treatment and power-generation equipment.
GE
shares fell the most since October 1987 on April 11,
when Immelt announced a surprise decline in
first-quarter earnings, blaming turmoil in credit
markets. The credit crunch also has prompted several
financial companies to seek to offload their rail units
to shore up capital and re-focus on their main
businesses.
The UK’s
Royal Bank of Scotland Group Plc. agreed to sell its
train-leasing unit to Babcock & Brown Ltd. and partners
in June for £3.6 billion ($6.91 billion). The
Babcock-led group wanted to benefit from rising rail
travel in the UK
CIT
Group Inc., the commercial lender that tapped emergency
credit lines this year when cash ran short, is also
assessing offers for its rail-leasing division. The
company received multiple bids, including at least one
from outside the US, according to chief financial
officer Joseph Leone. CIT Group hired advisers in April
to assess options for the unit, which has assets of
about $4 billion. (Bloomberg) |
