GE Closes Asset Management Business Sale With State Street

Industrial goods manufacturer General Electric Company (NYSE:GE) recently completed the divesture of its Asset Management business to asset management firm State Street Corporation (NYSE:STT) for approximately $485 million. The company intends to utilize the proceeds from the transaction for the GE Pension Trust, thereby increasing the trust assets used for paying GE pension plan benefits.

The transaction will augment the asset management portfolio of State Street Global Advisors, the investment management division of State Street Corporation, by $100 billion. The deal offers complementary businesses to State Street Global Advisors like alternative assets and Outsourced Chief Investment Officer mandates, the GE pension plan and other benefit plans managed by GE Asset Management’s third-party client base.

With $2.3 trillion assets under management, State Street Global Advisors has an extended distribution network and offers a perfect platform for a seamless integration of the acquired assets and human capital. The combined entity would have a perfect blend of businesses to serve a wide array of customers across both the private and public sectors.

The divesture of GE Asset Management is in tune with the corporate strategy of General Electric to focus on its core industrial businesses. General Electric is engaged in massive restructuring initiatives to create a simpler and nimbler firm. From a classic conglomerate with diversified business interests in financial services, media, industrial and technology-based operations, the company is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge.

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During the period of Apr 2015 to Jun 2016, GE Capital inked sale agreements worth approximately $180 billion in ENI (MI:ENI), of which it has already completed deals worth $156 billion. By the end of 2016, the company expects to sell $200 million of GE Capital assets across the world. The transactions are in conformity with the corporate strategy of building a manufacturing-based entity with emphasis on big-ticket items such as aviation engines, drilling machines, generators, medical equipment and scanners. With these restructuring initiatives, General Electric expects operating earnings from the industrial business to comprise over 90% of its total operating earnings by 2018, significantly up from 58% in 2014.

The corporate restructuring activities have also positioned General Electric to probably become the first company to drop its too-big-to-fail label. General Electric is scheduled to report its second-quarter results on Jul 22, while its peers Honeywell International Inc. (NYSE:HON) and 3M Company (NYSE:MMM) are slated to report on Jul 22 and 26, respectively.