Royal Bank of Canada has confirmed it is buying Ally Financial Inc.?s Canadian auto finance and deposit business, for a net purchase price of $1.4-billion (U.S.).
RBC said the business offers inventory financing to more than 580 car dealerships across the country. The consumer side offers retail financing to consumers through roughly 1,600 dealerships; it has about 450,000 consumer loans.
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The book value of the assets being acquired ? as of Sept. 30 ? was $3.4-billion, RBC said in a news release.
RBC?s actual investment, net of excess capital, is $1.4-billion.
The total consideration is between $3.1-billion and $3.8-billion, subject to certain closing adjustments and including the excess capital. The final closing price depends on the size of the dividend taken out by the seller.
The announcement confirms a report by The Globe and Mail.
?Ally Canada will add significant scale to our existing consumer and commercial auto financing business and will strengthen RBC?s position as a leader in the Canadian auto finance industry,? Dave McKay, group head of personal and commercial banking at RBC, said.
RBC says the addition of Ally Canada to RBC?s existing business will result in a leading auto-financing player in Canada, with about $24-billion in receivables and financing to more than 890 dealerships.
The consumer business will offer financing via some 4,000 dealerships across Canada.
RBC anticipates that Ally Canada will generate about $120-million in net income on a standalone basis in the first year post-closing, before integration costs and amortization of intangibles and transaction costs.
Meanwhile, RBC says it has also signed a deal with General Motors of Canada to become a provider for its subvented business upon closing. Subvented loans are low-rate consumer auto loans that are subsidized by the manufacturer.
The legal entities being acquired are Ally Credit Canada Ltd., and ResMor Trust Co.
The deal is expected to close in the first quarter of 2013.
Ally said in a separate news release that it stands to receive about $4.1-billion in proceeds from the transaction.
Ally is the former General Motors Acceptance Corp., the financing arm of GM.
The company has been undergoing a worldwide restructuring that includes the shedding of $30-billion in assets.
?This transaction [with RBC] represents another significant step toward our plans to pursue strategic alternatives for our international operations and accelerate plans to repay the remaining U.S. Treasury investment,? said Ally chief executive officer Michael Carpenter.
Ally received a $17-billion bailout from the U.S. government during the financial crisis, but has paid back only $5.8-billion, including dividends.
Ally?s Canadian division is coveted by the country?s big banks because they rarely see assets come up for auction.
With files from Tim Kiladze?
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Source: http://chinasy378.com/rbc-acquires-ally-financials-canadian-arm/
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