Mubadala and General Electric agree to sell joint venture to US private equity firm

Mubadala and GE Capital have agreed on a deal to sell their commercial finance joint venture to a unit of Apollo Global Management, a US private equity firm.

Mubadala GE Capital (MGEC) in Abu Dhabi has signed a deal to sell “substantially all of the assets” of the company and its subsidiary firms to MidCap Financial.

A price for the sale, which will be paid in cash, has yet to be agreed and “is subject to customary adjustment”, MGEC said.

It also said the deal was subject to conditions and “may be terminated under certain circumstances”. It is expected to close in the last quarter of the year.

Rumours about a sale of the business – which had net assets of US$954 million at the end of June, up from $885m at the end of last year – first emerged in April when GE announced that it was exiting the commercial finance business.

At the time, however, Mubadala said there were “no current plans to change the shareholding or strategy of the business”, adding that the 50/50 joint venture was an important part of the companies’ partnership that continued to deliver profitable growth.

MGEC declared an 8.6 per cent rise in net profit to $68.6m in the first six months of this year because of a 31 per cent surge in net interest income to $104m.

MidCap Financial said it was acquiring a book of corporate and property loans worth $3.6 billion as part of the deal. These are largely loans made to companies in the United States and the United Kingdom.

MGEC’s last filed accounts to June 30 said it had a loan book worth $4.2bn, which made up the bulk of its total asset base of $4.6bn.

Steve Curwin, Midcap Financial’s chief executive, said the acquisition “advances our strategy to be a significant player in the middle-market lending space and builds on our franchises in a number of markets”.

“The opportunity to add a highly diversified portfolio of this quality to our platform is unique,” he said.

Midcap Financial is an asset-based lender that provides loans to the healthcare, life sciences and property sectors, as well as leveraged loans to private equity-backed companies.

The Apollo Global Management partner Howard Widra said MGEC’s portfolio would “greatly accelerate our direct origination efforts in the middle market”.

A spokesman for MGEC said the joint venture business, based in Abu Dhabi Global Market Square on Al Maryah Island, would remain in operation, and other partnerships between Mubadala and General Electric – including the GE Innovation Centre at Masdar – were unaffected by the sale. Mubadala also retains a 0.76 per cent stake in GE, according to its website.

Citigroup has acted as a financial adviser to MGEC on the deal, while Allen & Overy provided legal advice.

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