GE to Sell Finance Unit to Canada-Based BMO
General Electric has agreed to sell its Transportation Finance unit, North America’s largest lender to the commercial truck and trailer markets, to Toronto-based BMO Financial Group.
BMO’s U.S. subsidiary, Chicago-based BMO Harris Bank, will oversee the business and said it will retain GE Transportation Finance’s Dallas-based management team and 600 employees. No sales price was disclosed for the deal that is expected to close later this year. However, the sale includes assets worth about $9.75 billion, including goodwill but excluding interest, the GE unit said.
“It’s a name change. Not a culture change,” Daniel Clark, GE’s Transportation Finance president, said in an exclusive interview with Transport Topics.
Clark said BMO “has exposure within the industry — obviously, not to the extent we do from a size perspective — and BMO knows the industry, understands it, and this is an area they want to grow in.”
Transportation Finance counts as customers 1,400 dealers and equipment manufacturers, and 38,000 owner-operators and fleets in North America.
Clark said he expects strong truck and trailer sales to continue for the next few years. He forecasts that 64% of midmarket trucking companies are considering additional financing for company vehicles and that 59% are considering equipment financing, based on a survey he did of top executives.
“The transaction will further our strategy in the U.S. by adding a leading franchise with a differentiated business model, driven by superior systems and underwriting capabilities,” BMO Financial Group CEO William Downe said in a conference call with analysts Sept. 10.
Clark noted that BMO will be able to offer customers banking products covering real estate and asset management.
National, regional and local banks, he said, all are Transportation Finance’s competitors as are the captive finance operations of certain truck manufacturers.
“This space does not lack for competition, by any means,” he said.
Transportation Finance has served as the captive finance provider for truck maker Navistar International since 2010.
Navistar spokesman Steve Schrier told TT the truck and engine maker believes BMO’s acquisition, “is a good fit for Navi-star, and we don’t anticipate these changes to impact operations. We expect a smooth transition and business as usual. BMO offers a full suite of financial products for dealers and end-users. They understand the transportation space and want to grow the business.”
BMO, for its part, welcomed Clark and his staff with open arms.
“Relationships are extremely critical in this business,” Dave Casper, BMO Financial Group president and head of commercial banking at BMO Harris Bank, said on the analysts call. “And the management team, led by Dan Clark, has built this business customer by customer, throughout the supply chain from the manufacturers to the dealers and ultimately, to the end- user. This has resulted in a very good business.”
Casper said about 83% of Transportation Finance’s business are loans and 17% are leases. About 90% of the loans and the assets are in the United States.
Clark acknowledged that he and others were “a little surprised” by General Electric’s decision to sell the business, a choice made as GE refocused on its industrial businesses.
“To say the least, but I was very confident because of what we do and our position in the market that we would end up in a good place and continue to serve our customers and keep our employees happy. That’s the important part of it,” Clark said.
Earlier this year, Toronto-based Element Financial Corp. an-nounced a plan to buy GE Capital’s fleet-management business in the United States. The deal should close Sept. 30 and includes similar operations in Mexico, Australia and New Zealand.
Bloomberg News reported Bank of Montreal’s agreement with General Electric is the latest in a U.S. expansion that began in 1984 with the purchase of Chicago-based Harris Bank. The lender’s last major U.S. deal was its July 2011 takeover of Milwaukee-based
Marshall & Ilsley Corp., which doubled deposits and branches and strengthened its commercial lending focus across the Midwest.
BMO is the eighth-largest bank in North America and turns 200 years old in 2017.
Transportation Finance traces its beginnings as a separate entity to 1974 when Gulf + Western Industries, which bought a lender called The Associates in 1968, created a separate division under that name for truck financing. The Associates had opened in 1917 to finance automobiles and began financing trucks in the 1950s. Before General Electric, Ford Motor Co. then Citigroup were owners of what operates now as Transportation Finance.
