Aegon N.V. today announced it has reached an agreement, through its subsidiary Transamerica Finance Corporation (TFC), to sell most of TFC’s commercial lending business to GE Commercial Finance
The business-to-business financial services unit of the General Electric Company, for a total payment of approximately USD 5.4 billion*.
The sale price represents a premium over net receivables of USD 0.3 billion and results in an after-tax book gain of around USD 0.25 billion under Dutch Accounting Principles, which will be added directly to shareholders’ equity, and will not be included in net income. The transaction is expected to close before year-end 2003.
Under the terms of the agreement, Aegon will sell all of those TFC business units that provide distribution financing (including inventory floorplan financing) for manufacturers and dealers, as well as equipment financial services and specialty finance units that engage in leasing and commercial loan financing for equipment, real estate, technology companies and international structured finance. The transaction covers USD 8.5 billion of managed assets and includes the repayment of USD 3.8 billion of TFC’s debt.
Approximately USD 2.4 billion of this debt has been provided internally by Aegon. The units being sold, acquired in 1999 as part of Aegon N.V.’s acquisition of Transamerica Corporation, include approximately 1,700 employees and serve customers primarily in North America and Europe.
TFC’s commercial lending operations, most of which is currently being sold, contributed EUR 94 million, before funding costs on the related raised debt, to Aegon’s net income in 2002.
This transaction is consistent with Aegon’s strategy to focus on its core business of life insurance, pensions and related investment products. Considering GE’s leadership in commercial finance, Aegon is pleased that TFC’s commercial lending business will become part of their organization.
After conclusion of the sale, TFC’s remaining businesses will primarily consist of maritime container and European trailer leasing, and real estate information services. Total managed assets will be approximately USD 2.1 billion.
In addition to the USD 2.4 billion of internal debt, which will be retired, Aegon will use the USD 1.0 billion net proceeds of the transaction to retire outstanding debt. The closing will occur after receipt of regulatory approvals and is subject to the amendment or waiver of certain provisions of TFC's outstanding debt securities as well as other customary closing conditions. Aegon N.V. intends to offer its guarantees as consideration in connection with its solicitation of consents from the required percentage of TFC debt holders to effect the requisite amendments or waivers.
* The amount of USD 5.4 billion includes an outright asset sale of USD 0.7 billion.