In the biggest deal to date for GE Money Canada, the Canadian consumer-lending unit of Connecticut-based General Electric Co., is buying Hudson’s Bay Co.’s credit card business for an estimated $370 million.

“This is very exciting for us,” says Stephen Motta, president and CEO of Mississauga, Ont.-based GE Money. “It expands the entire scope of our capabilities.”

The deal more than doubles GE Money’s employee roster, adding 650 workers from HBC Financial Services to GE Money’s staff of 600, he says. The addition of HBC operations centres in Vancouver, Montreal and Toronto also significantly expands GE Money’s exposure well beyond the single centre it runs in Edmonton, says Motta.

GE Money has high hopes for the new arrangement, which provides the company with a marketing reach of 3.1 million HBC cardholders, all prime targets for a range of GE Money financial products. The deal also allows it to tap into the strength of the popular HBC Rewards loyalty program, he adds.

Residential mortgages

“One of the first things we’d be very excited about is residential mortgages,” he says. Once the deal receives regulatory approval, GE Money, which just entered the mortgage business in Canada last year, will develop mortgage financing arrangements that will tie in with HBC’s loyalty points program. In other words, consumers will be able to earn points with their mortgages, he says.

In addition, GE Money plans to introduce a co-branded HBC/MasterCard card, an essential part of HBC’s credit arsenal and one that has been missing since its relationship with CIBC VISA ended late last summer. A co-branding deal with another bank was severed during an endorsed takeover offer by HBC’s largest shareholder, American investor Jerry Zucker.

The GE Money deal — which includes an up-front payment to HBC along with annual performance payments based on credit sales, new account acquisitions and new product introductions — makes sense for Canada’s largest department store chain, says Hillary Stauth, HBC’s director of corporate communications.

“We thought that the market conditions were such that there was potential for the company to realize immediate value for the credit card business while, at the same time, maintaining a steady stream of income from a partnership similar to what other retailers have been able to achieve with the sale of their credit card businesses,” says Stauth.

Strong track record

GE Money’s track record with its core business area is, indeed, strong. It handles the private-label card business for a number of retailers in Canada, including Wal-Mart, Sam’s Club, Linens-N-Things and Ben Moss Jewellers.

Meanwhile, in the past few years, its U.S. arm has signed several deals with prominent department stores boasting established credit card programs, including Dillard’s Inc. of Little Rock, Ark. and Mervyns, a Hayward, Calif.-based chain. The company’s retail experience makes it a good fit for HBC, says Stauth.

Terms of the HBC/GE Money deal also make for a true alliance between HBC and GE Money, Stauth says. GE Money will provide credit marketing and analytical support, along with credit servicing and customer care for the retail cardholders. HBC, in turn, is still responsible for the marketing of the cards, using in-store promotions, discounts and reward points to generate new accounts and encourage credit card use.

“A successful retail credit card operation involves acquiring new accounts,” she says. “But, more important, it’s about getting customers to use their credit cards while they’re in the store.” IE