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WASHINGTON : US banking and brokerage titan Merrill Lynch has agreed to sell most of its mid-market commercial finance business, Merrill Lynch Capital, to GE Capital, the two companies announced Monday.
Merrill, which is battling to shore up its finances after suffering multibillion losses on ailing mortgage investments, and GE did not reveal the financial terms of the deal.
The two firms said they hope to close the deal in the first quarter of 2008 and said GE would gain US$10 billion in assets and US$5 billion in commitments to GE Capital under its terms.
The business provides commercial finance know how and services to a range of companies covering different industries.
"This transaction reflects Merrill Lynch's continued strategic focus on divesting non-core assets and optimising capital allocation, while also enabling the redeployment of approximately US$1.3 billion of capital into other parts of our business," said Merrill's new chief executive officer John Thain.
The investment bank's finances have been stressed by an extended US housing slump, which has seen property prices tumble and home foreclosures leap, and a related credit crunch.
Thain, a former CEO of the New York Stock Exchange, was hired to help restore Merrill's stricken finances.
Many analysts expect the investment house to reveal further losses when it posts its fourth quarter earnings.
GE executives said Merrill's business would fit neatly with GE Capital's businesses and help expand the reach of their operations. - AFP/ch
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