Today GE (NYSE:GE) completed the separation of Synchrony Financial (NYSE: SYF), the largest provider of private label credit cards in the United States[1]. Synchrony Financial has been a part of GE Capital for more than 80 years, helping consumers finance purchases from clothing to jewelry to RVs to furniture …but the time was right for it to become independent. The separation is a very important step in GE’s journey to reduce its financial services footprint and we are proud of and excited for our friends at Synchrony as they become a standalone company. Synchrony is a great business – it is well run, has excellent partner and customer relationships and a strong financial profile.
GE made the decision several years ago to reduce the size of its financial services business and the decision to exit our U.S. consumer finance business (now Synchrony) was a clear choice. Today caps a nearly two year process to split off Synchrony. It is no small task to take 80 years of togetherness – shared systems, shared resources, shared cultures – and make an independent, standalone firm.
In July 2014, we took the major first step and offered 15% of Synchrony to the public in what was one of the year’s largest IPOs. This allowed us to establish Synchrony as a separately traded stock and allowed Synchrony to raise capital to stand on its own. Following the IPO, together we spent the next 12+ months building the infrastructure needed to separate.
Today, we took the last step in the separation by completing an offer to exchange shares of GE common stock for the remaining 85% of shares of Synchrony Financial common stock owned by GE. Under the terms of the exchange offer, shareholders who participated in the exchange, which was oversubscribed, will receive 1.0505 shares of Synchrony common stock for each share of GE common stock accepted in the exchange offer.
The successful conclusion of the exchange offer is great news for both GE and Synchrony. GE will retire more than 671 million shares through the exchange which will reduce our outstanding float by approximately 6.6% — said another way, this is the equivalent of a $20.4 billion GE share buyback. This was an efficient way to return capital to GE while also executing on our strategy to focus on our industrial core and reduce the size of our financial businesses.
This was the largest share exchange ever done –huge size and scale which resulted in a massive step forward in GE’s transformation — and positive news for both GE and Synchrony Financial shareholders.
[1] Based on purchase volume and receivables, The Nilson Report (April 2015, Issue #1067)