Stellantis to acquire First Investors to build new captive
General Motors acquired AmeriCredit 11 years ago in a move that eventually led the formation of its new captive finance company at GM Financial.
Another domestic OEM is on the same path.
On Wednesday, Stellantis announced it has entered into a definitive agreement to acquire F1 Holdings Corp., parent company to First Investors Financial Services Group, a leading independent auto finance company that specializes in the subprime market — just like AmeriCredit.
According to a news release, the company formerly known as Fiat Chrysler plans to purchase First Investors through an all-cash transaction for approximately $285 million from an investor group led by Gallatin Point Capital and including affiliates of Jacobs Asset Management.
The company said the transaction is expected to close by the end of the year and is subject to customary closing conditions and regulatory approvals.
Stellantis explained that its strategic objective is to establish a U.S. captive finance company to support its sales and fully capitalize on its strong market position while creating long-term value for Stellantis shareholders. The company said the acquisition of First Investors allows Stellantis to create a platform from which to grow a full-service captive finance organization.
Stellantis pointed out that it is the only major OEM currently operating in the U.S. without a captive auto finance company. The company added that the transaction represents a “meaningful strategic opportunity, with significant potential for accretive earnings generation and improving customer loyalty.”
Stellantis went on to say that a captive finance company will enhance the ownership experience and connectivity in the digital age for customers who purchase Jeep, Ram, Dodge, Chrysler, Fiat and Alfa Romeo vehicles and provide future opportunities to enable emerging business strategies.
“This transaction marks a significant milestone in Stellantis’ sales finance strategy in the critical U.S. market,” Stellantis chief executive officer Carlos Tavares said in the news release. “First Investors has an outstanding financial and operational platform, underpinned by a strong management team, with vast experience in the auto finance space.
“Direct ownership of a finance company in the U.S. is a white-space opportunity which will allow Stellantis to provide our customers and dealers a complete range of financing options, including retail loans, leases, and floorplan financing in the near-to-medium term,” Tavares continued.
It’s definitely been a year of change at First Investors Financial Services Group.
In January, First Investors said the acquisition of the subprime auto finance company by funds affiliated with Gallatin Point Capital and minority investor Jacobs Asset Management had closed, following receipt of all required consents and regulatory approvals in a process that began during the previous fall.
While terms of that merger were not disclosed, but the announcement indicated a portion of the proceeds from the transaction were to serve to retire certain indebtedness of the company and provide additional working capital to grow and expand the company’s financing businesses as well as to accelerate its portfolio acquisition capabilities and third-party servicing segment.
At the time, First Investors noted that its executive management team had an average tenure of 17 years with the company.
And now those executives will be working with Stellantis.
“We are excited to join the Stellantis team,” First Investors president and CEO Tommy Moore Jr. said in Wednesday’s news release. “Becoming part of Stellantis provides long-term stability for our company and employees. We believe that there are significant untapped growth opportunities for First Investors under Stellantis ownership as we expand our product suite to support the auto sales growth of Stellantis.
“The First Investors management team is fully committed to ensuring a smooth and rapid integration into Stellantis. Meanwhile, we remain committed to continuing to offer our loans and services to our existing network of dealers and current business partners,” continued Moore, who was honored in 2017 as the Subprime Auto Finance Executive of the Year.
BofA Securities served as exclusive financial advisor and Sullivan & Cromwell as legal advisor to Stellantis. Ardea Partners served as exclusive financial advisor and Goodwin Procter as legal advisor to Gallatin Point.