The health care sector experienced another massive shift yesterday with the announcement that General Electric planned to sell Capital One a portfolio of health care sector loans worth $8.5 billion.

The move by financial giant GE is part of its previously announced aim to return to its industrial core businesses and sell off $100 billion of financial assets lodged in its finance arm, GE Capital, by the end of 2015. The deal is anticipated to close by year's end.

The loans are to various types of health care companies — from hospitals to pharmaceutical firms. Capital One will pay a 6 percent premium in the deal, which suggests the banking giant intends to keep GE employees and expand, according to MarketWatch.
As the deal will include not just the portfolio, but also management, it “will add to Capital One’s already strong health care lending business and create a leading health care banking platform,” according to Capital One. Specifically, it will add health care lending and depository products and treasury management services. Beyond that, Darren Alcus, now head of GE's Healthcare Financial Services is to keep the same position at Capital One, according to Forbes.

“This is a strategic investment in a specialty industry segment that we have been building out for the past several years," according to Michael Slocum, president of Capital One's Commercial Bank.

The buy represents another bold move by Capital One as it pivots from its credit card roots into being a major bank and lender. The firm topped other suitors in the bidding war that broke out at the auction of the unit last week, according to Reuters.

"This addition will catapult us to a leading market position in providing financial services to the health care sector," said Slocum.

The announced sales of various GE financial assets now total about $78 billion, putting it on track to hit its goal by year end. This deal, GE anticipated in its statement, "will contribute approximately $1.5 billion of capital to the overall target of approximately $35 billion of dividends expected to [accrue to] GE under this plan (subject to regulatory approval)."

"This transaction is another example of the value generated by GE Capital's strong businesses and exceptional teams as we continue to demonstrate speed and execute on our strategy to sell most of the assets of GE Capital," Keith Sherin, GE Capital chairman and CEO said in the statement.

The company's decision to focus on its high-value industrial businesses and unload most of GE Capital assets, however, does not mean it is out of the lending game completely.

"GE Capital will retain the financing 'verticals' that relate to GE’s industrial businesses, including a unit that provides health care equipment financing to GE Healthcare customers and others," according to the company.

Capital One is now one of the nation's biggest banks with over $200 billion in deposits and $310 billion in assets, according to MarketWatch.

Credit Suisse, Wells Fargo and the law firm Wachtell, Lipton, Rosen & Katz advised Capital One. Citigroup, JPMorgan Chase and the law firm Hogan Lovells advised G.E. on the deal.

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