US giant General Electric, the second largest company in the world in terms of market value, yesterday signed, through an investment division from London, the contract to buy the financial services companies controlled by the Romanian-American Enterprise Fund: Motoractive, Estima Finance (Ralfi) and Domenia Credit.
The deal targeted all the shares of the three companies and amounted to approximately 140 million euros, of which the Romanian-American Enterprise Fund (RAEF) will collect around 100 million euros.
General Electric is thus making its most important acquisition in Romania, after a discreet entry on the market in the early nineties.
The discreetly conducted talks began at the end of March after the submission of binding bids.
Several financial groups like HSBC (UK), AIG Consumer Finance and Societe Generale were in the race for the acquisition of the three financial service companies. The French, however, were only interested in buying Estima Finance, while the sellers wanted a packaged deal, whereby the buyer would take over all three companies as a bundle. In the end, GE Capital London was selected for the final talks in May.
RAEF had 60% in Domenia Credit (a mortgage lending company) prior to the sale, 80% in Motoractive (one of the largest independent leasing companies on the market) and 72.5% in Estima Finance (consumer finance company). The rest of the Estima Finance shares (27.5%) are held by home appliances retailer DoMo.
RAEF also owns a 20% stake in home appliances retailer DoMo, the second leading player in terms of sales after Altex. Others to have sold side by side with RAEF are the European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC, the World Bank”s investment arm), and DEG – Deutsche Investitions und Entwicklungsgesellschaft GmbH, which held 40% in Domenia Credit together. The Germans at DEG have also sold their 20% in Motoractive. The value of the contracts signed by Motoractive in 2005 amounted to 91.3 million euros, with the net profit posted exceeding 4 million euros, 2.5 times higher than in the previous year. The company doubled its staff to 104 people due to expansion of operations.
Estima Finance had budgeted a contract value of more than 70 million euros for last year.
Domenia Credit, established by RAEF in 2003 has recently increased its share capital by 1.36 million euros from an initial 3 million euros.
Specialized in granting mortgage loans, Domenia Credit plans to become a mortgage credit bank, as soon as the legal framework has been perfected.
As a mortgage bank, Domenia will be able to issue mortgage bonds, raise credits from the capital market in form of bonds and accessible long-term crediting sources. This deal enables GE to considerably strengthen its positions in Romania.
The Americans are taking over a network of financial services and announced as early as last year that they were going to start a project, investing over 80 million euros in creating a business service platform for corporate clients.