AmEx buys GE’s corporate charge card unit for $1 billion
American Express agreed to buy General Electric’s corporate charge-card unit for $1.1 billion in cash to expand lending for business customers. The sale will dilute American Express’s earnings per share in the “early years,” assuming the cash is d...
By Bloomberg |
NEW YORK/ CHICAGO: American Express agreed to buy General Electric���s corporate charge-card unit for $1.1 billion in cash to expand lending for business customers. The sale will dilute American Express���s earnings per share in the ���early years,��� assuming the cash is diverted from repurchasing stock, the New York-based credit-card company said in a statement on Thursday.
Chief executive officer Kenneth Chenault is seeking to add business clients as US consumers struggle to pay back loans. Fourth-quarter profit fell 9.9% as the company more than doubled the amount set aside for soured US credit-card debt to $1.14 billion amid a slowing economy.
The unit being acquired has ���premium��� clients with strong credit records, Anre Williams, president of American Express���s Global Commercial Card and Services business, said in the statement. Customers typically pay their balance in full at the end of each month, American Express said.
The business serves more than 300 corporate clients and handled $14 billion in transactions in 2007 including expenses for corporate travel and entertainment. General Electric, based in Fairfield, Connecticut, started the unit in 1992 to issue cards to its employees. GE agreed to remain a client when the business is transferred to American Express.
The rate that customers repaid loans worsened ���quite suddenly��� in December, causing American Express to lower its 2008 estimates, chief financial officer Daniel Henry said in January. The weakness was isolated in the US consumer, not in other countries or in business spenders, he said.
Government reports in the past week showed new home sales fell to a 13-year low in the US, and the four-week moving average for initial jobless claims reached the highest since October 2005. American Express has declined 20% in the past year in New York Stock Exchange composite trading, while General Electric gained about 3.7 %. The sale is expected to be completed by the end of the month.
Chief executive officer Kenneth Chenault is seeking to add business clients as US consumers struggle to pay back loans. Fourth-quarter profit fell 9.9% as the company more than doubled the amount set aside for soured US credit-card debt to $1.14 billion amid a slowing economy.
The unit being acquired has ���premium��� clients with strong credit records, Anre Williams, president of American Express���s Global Commercial Card and Services business, said in the statement. Customers typically pay their balance in full at the end of each month, American Express said.
The business serves more than 300 corporate clients and handled $14 billion in transactions in 2007 including expenses for corporate travel and entertainment. General Electric, based in Fairfield, Connecticut, started the unit in 1992 to issue cards to its employees. GE agreed to remain a client when the business is transferred to American Express.
The rate that customers repaid loans worsened ���quite suddenly��� in December, causing American Express to lower its 2008 estimates, chief financial officer Daniel Henry said in January. The weakness was isolated in the US consumer, not in other countries or in business spenders, he said.
Government reports in the past week showed new home sales fell to a 13-year low in the US, and the four-week moving average for initial jobless claims reached the highest since October 2005. American Express has declined 20% in the past year in New York Stock Exchange composite trading, while General Electric gained about 3.7 %. The sale is expected to be completed by the end of the month.
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