Synchrony Raises $2.88 Billion Pricing IPO at Low End of Range

Jul 31, 2014 12:01 am ET

July 31 (Bloomberg) -- Synchrony Financial, the consumer- lending arm being spun off from General Electric Co., raised $2.88 billion in the biggest U.S. initial offering this year.

Synchrony, which issues private-label credit cards for Wal- Mart Stores Inc. and Amazon.com Inc., sold 125 million shares for $23 apiece, according to data compiled by Bloomberg, after offering them for $23 to $26. At the IPO price, Stamford, Connecticut-based Synchrony has a market value of about $19 billion. GE, which didn’t sell shares in the IPO, will own 85 percent of the company after Synchrony sold a 15 percent stake.

While Synchrony’s name is just months old, its predecessor traces back to the Great Depression, when Americans needed help financing purchases of their GE appliances, from air conditioners to washing machines. During the latest economic crisis, GE Capital Corp. put the parent company at risk, prompting Chief Executive Officer Jeffrey Immelt to divest assets within the unit.

GE says it expects to make a tax-free distribution of its remaining Synchrony stock to willing shareholders, preserving the option for another type of transaction. While a two-stage exit creates uncertainty for prospective Synchrony investors, the Fairfield, Connecticut-based parent company said it could benefit GE shareholders.

The process is “the most tax-efficient, shareholder- friendly way” to divest Synchrony, GE Chief Financial Officer Jeff Bornstein said in a July 18 interview. The company plans to use the proceeds to repay debt owed to GE Capital.

Synchrony, listed on the New York Stock Exchange under the symbol SYF, will begin trading today.

Ally Financial

Synchrony has been the largest issuer of store credit cards for the past decade and makes up 42 percent of the market, according to the Nilson Report, an industry newsletter that tracks the payments industry.

Synchrony posted net earnings of $1.98 billion in 2013, a decline of 6.6 percent from the prior year, according to the company’s prospectus. The company financed $93.9 billion in purchase volume last year, and as of March had 57.3 million active accounts. Synchrony remained profitable during the financial crisis.

Ally Financial Inc., the auto lender rescued by the U.S. government during the 2008 financial crisis, raised about $2.6 billion from its April debut, the second-largest IPO in the U.S. this year, according to data compiled by Bloomberg.

Consumer-finance firms have slipped since IPOs this year. Ally has declined 7.8 percent since its offering. Subprime car lender Santander Consumer USA Holdings Inc. has slumped about 18 percent after its $2 billion debut in January.

Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc. and Morgan Stanley led a team of 31 underwriters to manage the IPO.