GM Financial Acquires Ally’s Remaining Foreign Operations
DETROIT — As the industry prepared to depart for the Thanksgiving
holiday last week, General Motors Financial announced how much cash it was
getting from its parent automaker to acquire the remaining foreign operations
of Ally Financial.
Officials said GM will contribute approximately $2 billion
in cash to GM Financial to increase its equity and ensure an appropriate pro
forma capital structure so it can complete the acquisition of automotive
financing operations in Latin America, Europe and China from Ally Financial.
"GM is entering the most aggressive rollout of new vehicles
in its history, and this acquisition will make us an even more formidable
competitor by ensuring that competitive financing is available to our customers
and dealers around the world," said GM senior vice president and chief
financial officer Dan Ammann.
GM established GM Financial in 2010 via its acquisition of
AmeriCredit to add captive financing capabilities in the United States and
Canada in the subprime segment.
Officials said with the addition of Ally International
Operations, GM Financial will be able to support GM customers and dealers in
markets comprising about 80 percent of GM's global sales while earning strong
risk-adjusted returns.
"The Ally International Operations have very strong
underwriting and risk management, close relationships with GM dealers and an
excellent customer service reputation," said Dan Berce, president and chief
executive officer of GM Financial.
"The addition of these businesses significantly strengthens
GM Financial's core role, which is to support the sale of GM vehicles," Berce
continued. "The international operations leadership team will also transition
to GM Financial, which will provide tremendous continuity for stakeholders and
customers."
The transaction includes operations in Brazil, Mexico,
Colombia, Chile, Germany, the United Kingdom, France, Italy, Belgium, the
Netherlands, Sweden, Switzerland and Austria.
It also includes Ally's 40 percent interest in its Chinese
joint venture GMAC-SAIC Automotive Finance Company.
The companies said the purchase price for the acquired
assets represents an approximately $550 million premium to their book value,
which for the third quarter was approximately $3.7 billion.
Ally said it would receive approximately $4.2 billion in
proceeds from this transaction.
As result of the acquisition, GM Financial's assets will
double to approximately $33 billion and its liabilities, including consolidated
debt, will increase to about $27 billion compared with about $12 billion today.
The transaction is expected to add $300 million to $400
million to GM Financial's annual earnings before taxes (EBT). This will bring
GM Financial's pro forma annual EBT run rate to approximately $1 billion.
Officials said the transaction is expected to be completed
by the middle of next year and is subject to regulatory approvals.
"In May, we began a process to pursue alternatives for our
international operations in an effort to accelerate repayment plans for the
U.S. Treasury's remaining investment," said Ally CEO Michael Carpenter. "This
transaction represents the third and final agreement in recent weeks toward
those goals, and, combined, these sales are expected to generate approximately
$9.2 billion in proceeds."
Carpenter continued, "Our goals were to find the best
solution for each of the businesses, while also maximizing shareholder value,
and we believe those goals have been achieved. Next, we are focused on
completing each of these transactions and evaluating options to return capital
to the U.S. Treasury.
"Going forward, we remain squarely focused on further
strengthening and growing our leading U.S. automotive services and direct
banking franchises," Carpenter went on to say. "We have strong momentum in
these businesses, and continued successful execution of our strategic plans
will enable these operations to further thrive."
In October, Ally announced agreements to sell its Mexican
insurance subsidiary, as well as its auto finance and deposit businesses in
Canada.
With the agreement to sell the operations in Europe, Latin
America and the joint venture stake in China, the company pointed out Ally will
have effectively exited the international markets.
In total, officials
calculated these transactions are expected to generate proceeds of
approximately $9.2 billion, based on third quarter tangible book value of $7.6
billion, which reflects a premium of approximately $1.6 billion or 21 percent.
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