Merrill Lynch & Co Inc., buffeted by huge write-downs of mortgage-related securities, said on Monday it would sell most of its middle-market lending business to General Electric Co.'s commercial finance arm in a deal to free up capital.
The value of the deal was not disclosed. But Merrill Lynch's new chief executive, John Thain, said the sale of most of Merrill Lynch Capital will allow the brokerage to allocate about $1.3 billion of capital to other parts of the company.
Merrill Lynch shares rose 3.5 percent to $57.50 before regular trading began on the New York Stock Exchange. The company has said it will sell assets amid huge losses on subprime mortgage securities. The company's stock is down 40 percent this year.
The company lost $2.3 billion in the third quarter after recording an $8.4 billion write-down, mostly on subprime mortgage-related securities. Some analysts expect an even bigger write-down in the fourth quarter.
GE's acquisition of the Merrill Lynch Capital assets is expected to close in the first quarter. The deal will add more than $10 billion in assets and $5 billion in commitments to GE Capital Commercial Finance's base of $260 billion. (MSNBC.com a joint venture of Microsoft and GE unit NBC Universal.)
GE Capital will buy Merrill Lynch Capital's corporate finance, equipment finance, franchise, energy and health-care finance units. Merrill Lynch Capital's commercial real estate finance unit is not part of the transaction.
Merrill Lynch launched the middle-market finance unit in 2002 after GE bought Heller Financial Inc., a chief rival in that market segment, for $5.3 billion a year earlier. Merrill Lynch hired former Heller executives such as Robert Radway to run the business.