General Electric Co, the world's largest company by market value, offered between US$7.5 billion and US$8 billion to buy Tyco International Ltd's CIT Group finance unit, according to people familiar with the matter.
Tyco is considering the bid, one of the people said. Other financial firms are still looking at purchasing all or part of CIT, while GE's offer may also include other businesses, another person said.
GE's offer is a sign that Tyco is unlikely to recoup the US$9.2 billion it paid in June for New York-based CIT. Tyco said this month it would spin off the finance unit by July, accelerating a plan to split into four companies to quell investor concern that the company used acquisitions to mask slowing sales growth.
"What we are doing right now is heading down both paths simultaneously," pursuing both a spinoff and a sale, Chief Financial Officer Mark Swartz said on the company's weekly investor call Tuesday. "We can end up going in the direction that creates the most shareholder value going forward."
Brad McGee, Tyco's chief strategy officer, declined to comment on the sale process. GE Capital spokesman John Oliver also declined to comment, saying the company doesn't discuss "rumor or speculation." Tyco acquired CIT to offer financing to customers of its electronics and security, fire-protection and health-care businesses. Analysts have estimated a sale would fetch at least US$6 billion, the proceeds of which Tyco would use to help pay off debt at its industrial units.
The finance unit has been distancing itself from its parent by dropping the Tyco name and selling asset-backed securities to pay off debt. CIT sold US$2.2 billion in securities backed by home equity loans and customer bills in the past month.
Tyco, based in Bermuda and run from Exeter, New Hampshire, tapped US$14.4 billion in bank loans to repay short-term corporate IOUs. Its borrowing costs were climbing as investors questioned the accounting practices of Tyco and other companies after the collapse of Enron Corp.
CIT CEO Al Gamper said in a conference call with fixed- income investors that under the spin-off scenario, CIT hopes to be independent by May, though he also said the company continues to pursue a sale.
General Electric Chief Financial Officer Keith Sherin said on a webcast yesteday GE continues to look at acquisitions for GE Capital with about US$200 billion in assets, with US$117 billion of those assets under discussion. He didn't mention specific targets.