GE looks to offload container leasing division

General Electric and a joint venture partner are looking to sell their GE SeaCo container-leasing business for about $2.5bn, as the conglomerate continues to reshuffle its portfolio and the pair try to capitalise on the hot market for companies in the sector.

GE SeaCo, which is 50 per cent owned by GE’s finance arm, appointed Deutsche Bank to review strategic alternatives in October, and this year it took the first steps towards a sale process with a series of presentations to interested buyers.

Little public information is available on GE SeaCo, but people familiar with the matter say the owners are looking for a deal that pegs the company’s enterprise value at about $2.5bn. GE could also hold on to the business if it does not generate an acceptable price from bidders, but the company considers the segment to be non-core.

After struggling during the credit crisis, GE pledged to slim down its finance arm, focusing it on mid-market and industrial lending as part of a broader effort to shift the balance of its business towards its industrial units. On Sunday the company announced its fourth deal in the energy sector in recent months.

The container leasing industry has boomed during the past year. Manufacturers in China stopped producing during the downturn, creating a shortage in 2010 when the economy recovered and trade picked up.

GE SeaCo has the fifth-largest container fleet in the industry with about 870,000 20-foot equivalent units (TEUs), the industry standard measure.

For comparison, Chicago’s Pritzker family is nearing a deal to sell Triton Container International, which runs 1.8m TEUs, for an enterprise value of about $3bn, to Warburg Pincus and Vestar Capital Partners, according to people familiar with the matter.

Still, GE SeaCo has had a bumpy past. GE’s original partner, Sea Containers, went bankrupt in 2006 after disputes over how to manage the asset. Its bondholders eventually took over its 50 per cent stake through a new company, SeaCo.

Tal International and Textainer, the sector’s two biggest public companies, reported strong results last week and were optimistic about 2011. Cargo volumes continue to rise and the pair are rushing to buy as many containers as they can.

The share prices of Tal and Textainer have risen more than 190 per cent since the start of 2009, giving them market capitalisations of more than $1bn each, and a number of private equity firms have dabbled in the area.

Rising steel prices have boosted the sector, pushing up the price of new and old containers. On Thursday Tal said it would raise the residual value of its assets from $750 per TEU container to $900.

The GE SeaCo sale is expected to generate substantial interest among financial and industrial buyers who missed out in the Triton sale. Rival container leasing companies, for example, were specifically excluded from the Triton process.

GE and Deutsche Bank declined to comment on the sale process. SeaCo did not respond to requests for comment.