Kensington In Talks To Buy £2.5bn GE Unit

A British mortgage lender is in advanced talks to buy a division of General Electric’s (GE) vast finance arm in a £2.5bn deal that would help to accelerate the conglomerate’s return to its industrial origins.

Sky News has learnt that Kensington Group, which is a big player in the UK’s buy-to-let mortgage market, is hoping to wrap up a deal to buy a chunk of the GE Money Home Lending business that was put up for sale earlier this year.

Sources said that a deal could be announced imminently, although they added that it remained possible that another bidder could yet trump Kensington’s offer.

The portfolio being offloaded by GE is understood to comprise roughly £2.5bn of performing UK mortgage loans, with Kensington expected to pay around that sum to acquire it.

The latest deal will come as GE focuses on the range of industrial businesses in which its long heritage was established.

One of its main activities, the production of jet engines, suffered a setback on Wednesday when a GE engine caught fire as a British Airways flight was preparing to take off in Las Vegas.

The conglomerate also makes wind turbines, domestic appliances and healthcare products such as ultrasound machines.

Kensington, which was launched in 1994, was bought exactly a year ago by Blackstone Tactical Opportunities and TPG Special Situations Partners, which are part of two major Wall Street investment firms.

It (Other OTC: ITGL - news) was previously owned by Investec (LSE: INVP.L - news) , whose own £283m takeover of Kensington in the summer of 2007 proved to be an ill-timed foray into the market for sub-prime mortgage lending, just as financial markets began to seize up.

Prior to that, Kensington had been a publicly listed company whose former chief executives included John Maltby, who is now part of an investment consortium which is buying a stake in 315 Royal Bank of Scotland (LSE: RBS.L - news) branches.

If completed, the deal with GE would be significant for both parties, with America’s most famous conglomerate having signalled its intention to sell most of its enormous GE Capital business.

Since announcing that it would do so in April, GE has offloaded assets worth tens of billions of dollars and said that it is on track to dispose of $100bn by the end of this year.

Among the GE Capital assets it has sold include a division which lends money in Europe to private equity firms, which raised $2.2bn; a $16bn deposit book, which was sold to Goldman Sachs (NYSE: GS-PB - news) ; another $1.2bn of loans from its UK Home Lending portfolio; and its global fleet services business for $8.6bn.

GE, Kensington, Blackstone (NYSE: BX - news) and TPG (Taiwan OTC: 6521.TWO - news) all declined to comment.