GE Capital Offers to Buy Heller for $5.3 Billion

GE Capital, the finance arm of conglomerate General Electric Co., moved to gain more small and medium-size business customers Monday by offering $5.3 billion for Heller Financial Inc., one of the few commercial finance firms with stable earnings.

The news sent shares of Heller soaring 48%.

GE Capital, with assets of about $370 billion, zeroed in on Heller after two major acquisitions fell through this year. Both CIT Group Inc. and Finova Group Inc. ended up in the arms of competitors.

Buying Heller would be a boost for GE Capital’s parent GE, which suffered a stinging defeat recently when European antitrust regulators blocked its $43-billion takeover of diversified manufacturer Honeywell International Inc.

Stamford, Conn.-based GE Capital said it is offering $53.75 a share for Heller--50% more than Heller’s closing price of $35.90 on Friday on the New York Stock Exchange, and well above Heller’s 52-week high of $40.78, reached July 3.

Heller shares soared $17.09 to $52.99, while GE fell $1.05 to $43.60, both on the New York Stock Exchange.

Heller, founded 80 years ago in Chicago mainly to finance Hollywood studios, provides small and mid-size businesses worldwide with secured loans, equipment finance, leasing, asset management and small-business lending.

The sector, recently hit by an increase in bad loans and a decrease in demand, is gradually consolidating, with CIT acquired by Tyco International Ltd. this year, Associates First bought by Citigroup Inc. last year and Finova undergoing a bankruptcy restructuring.

“One of the reasons why we are able to pay the premium is because of the high quality of earnings. We will take advantage of cost synergies,” GE Capital Chairman and Chief Executive Denis Nayden said.

Nayden said Heller would contribute at least $250 million to its earnings within the first year after the deal is completed, expected by the end of this year. A total of more than $1 billion is seen in three years.

He also said GE Capital will achieve 30% to 35% cost savings.

Japan’s Fuji Bank Ltd., which owns 52% of Heller and controls about 77% of Heller’s voting power, said it has agreed to sell its stake to GE Capital. Fuji Bank is a subsidiary of top Japanese bank Mizuho Holdings.