General Electric's GE Capital Unit to Divest TPS Platform

General Electric Company’s GE business unit, GE Capital, recently entered into a deal with MUFG Americas Holdings Corporation (“MUAH”) to divest its leading supply chain finance platform — Trade Payable Services (TPS) — to MUFG Union Bank, N.A., a subsidiary of MUAH. However, the terms of the deal were kept under wraps.

It’s worth noting here that MUAH serves as the U.S. intermediate holding company of Mitsubishi UFJ Financial Group, Inc. MUFG. Mitsubishi UFJ Financial Group is a globally renowned financial institution with a network of more than 1,800 locations in above 50 countries.

Details of the Divestment Deal

On completion of the deal, MUFG Union Bank will take over the management and control of the systems and processes that support the supply chain finance activities of GE Capital.

Notably, GE and MUFG will work to ensure a smooth transition of the TPS platform from GE Capital. The buyout will enable MUFG to extend its offering of supply chain finance capabilities. Also, the deal is considered to be a win-win for GE Capital, GE industrial partners, external customers and GE suppliers.

Notably, the agreement is subject to regulatory approvals, closing conditions and consultation processes required per local laws.

Other Notable Development

This month, General Electric moved a step closer to divesting its business unit, GE Transportation, to Wabtec Corporation WAB, following the closure of review on the pending deal by the U.S. Department of Justice. Wabtec is a globally renowned manufacturer and provider of rail equipment.

It’s worth mentioning here that General Electric and Wabtec signed the divestment deal in May 2018. The value of the transaction is roughly $11.1 billion

Our Take

General Electric is poised to become more competent on the back of its portfolio-restructuring program. In June 2018, the company announced its plan to become a high-tech industrial company — focused on Aviation, Power and Renewable Energy — in June 2018. However, a weakening Power business remains a key cause of concern for the company.

The company currently carries a Zacks Rank #3 (Hold). This conglomerate’s share price has rallied 23.4% in the past month compared with 2.8% growth recorded by the industry.

Stock to Consider

A better-ranked stock from the same space is Hitachi Ltd. HTHIY, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hitachi delivered average earnings surprise of 55.51% in the trailing four quarters.

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