GE Is Desperate; Stake in Turkey’s Garanti Bankasi Sold for a $1 Billion Discount

When ridding itself of 18.6% of Turkey’s Garanti Bankasi for $3.776 Billion earlier today, GE Capital clearly left money on the table. Compare that to the $2.06 Billion that Dogus Group, a major shareholder of Garanti Bankasi, got for just 6.3% of Garanti Bankasi.

General Electric Company (NYSE:GE)

GE Capital not only received 22% less than the current market price of what Garanti Bankasi got in the Istanbul Stock Exchange, but also received 38% less than what Dogus Group received for each share. Is GE in serious trouble? Why did GE sell a major share of Turkey’s best bank for such a huge discount?

Something’s up.

Let us explain. Back in 2005, GE bought a 25.5% in the Turkish company for $1.75 Billion. That deal valued the bank at $7 Billion. Two years later, GE sold 4.65% of Garanti Bankasi back to Dogus Group at a deal that valued the bank at $14.5 Billion. The move that got GE more than 100% return on that 4.65% seemed like a great deal because Garanti shares went down by nearly 70% a little more than a year later. But the trend stopped shortly after. Since the end of 2008, the 20.85% of shares that GE was left with went up 500%. As all this is happening, the Turkish lira appreciated in real terms against the US dollar, so the value increase in Garanti Bankasi shares is astounding.

Currently Garanti Bankasi has a market cap of $26 Billion (remember – GE paid only $1.75 billion for more than a quarter of the company) with a trailing P/E ratio of 10.1. The price and multiple for one of the best managed banks in one of the fastest growing countries in the world are quite reasonable. The Turkish economy grew by more than 10% during the first half of 2010 and it has huge potential in the banking industry. The real interest rates had been more than 10% for nearly 30 years. Only during the past year or did it go down to normal levels. The banking industry is still very small compared to developed markets, but that may be because Turkish people aren’t used to borrowing money from banks yet. As the culture changes, the role of banks will solidify. Right now, the total value of outstanding mortgages is only 4% of Turkey’s GDP. This is nothing. Low interest rates and the flood of foreign capital is enabling a boom in the real estate market where people are finally able to borrow at affordable rates. Banks will be big winners during the next few years.

For some unknown reason, GE sold its Garanti Bankasi stake – valuing the company at only $20.3 billion – for nearly a quarter less than the current market cap. Why? We don’t know. What we do know is that Garanti Bankasi isn’t a bad stock to own. So there must be something going on at GE. They left nearly $1 Billion on the table. Remember  the 4.65% share GE sold in 2007 to Dogus Group? Dogus Group received more than double that for the same number of shares today when they sold their stake. Dogus Group also received 61.5% more per share than GE received.

A series of bad moves, and GE knows it. Insider Monkey, your source for free insider trading data, thinks GE is desperate.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!