General Electric to Pay $1.56 Billion for Stake in Garanti Bank....

[merlin]

Bloomberg


General Electric Co. agreed to pay $1.56 billion for a stake in Turkiye Garanti Bankasi AS, the third-biggest publicly traded lender in a country where consumer borrowing has almost doubled in a year.

General Electric's consumer finance unit will buy 25.5 percent of the company from the Dogus group in a deal valuing Garanti at $6.1 billion, according to a statement from Dogus today.

Shares of Garanti, worth $5.6 billion at yesterday's close, were suspended.

Chief Executive Officer Jeffrey R. Immelt is expanding in commercial and consumer finance in emerging markets to boost profitability and expects sales outside the U.S. to rise by about half to $120 billion in the next five years. Banks including France's BNP Paribas SA have bought Turkish lenders this year after the country won backing to start European Union membership talks.

General Electric is "paying a good price, which is encouraging for future deals as well,'' said Figen Cevik, an analyst at Oyak Securities in Istanbul. "This will improve Garanti's cash equity base and its future profitability.''

General Electric will pay an additional $250 million for 49 percent of Garanti's founder shares, a special class of stock that confers additional dividend rights. It will also make an offer to Garanti's remaining shareholders once the transaction is approved by regulators. Dogus will keep a 25.5 percent stake in Garanti.

Dogus said it will run the Istanbul-based bank jointly with General Electric, appointing five directors to the nine-member board, with General Electric picking four.

Earnings Increase

General Electric, based in Fairfield, Connecticut, in July forecast profit from the consumer-finance unit to rise about 20 percent to $3 billion this year as the company offers loans and banking services in markets such as Turkey and Malaysia.

Falling inflation and interest rates have prompted a boom in consumer borrowing in Turkey, boosting bank profits. Inflation fell to 7.8 percent at the end of July, the lowest for more than three decades. Turkey's economy grew 8.9 percent last year.

Garanti reported net income of 165.3 million liras ($120 million) in the second quarter, more than double the year-earlier figure. The bank's loan book grew to 13.3 billion liras at the end of June from 10.5 billion at the start of the year.

Paris-based BNP Paribas and Belgium's Fortis have both bought Turkish banks this year. Italy's UniCredito Italiano SpA has reached a provisional accord to expand its Turkish venture by buying the country's No. 4 listed lender, Yapi & Kredi Bankasi AS.

The purchase by GE Consumer Finance, which is based in Stamford, Connecticut, also is subject to enactment of a law pledged by Turkey's government that will allow banks to transfer their pension funds to the national social security institution.



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