RBC to buy Canadian auto finance unit of Ally Financial
Deal comes following unconfirmed reports that RBC and TD Bank had been bidding for Ally Canada
TORONTO—Royal Bank of Canada has confirmed it will acquire the Canadian auto finance and deposit business of Ally Financial Inc., which has been selling international assets in order to repay a U.S. government bailout loan.
There had been unconfirmed reports that RBC and TD Bank, Canada’s two largest commercial banks, had been bidding for Ally Canada.
The assets are part of those of the former General Motors financing arm.
“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,” said Dave McKay, the head of RBC’s Personal & Commercial group.
“This is a strong business with favourable industry dynamics and the combination with RBC provides opportunities to leverage our existing strengths and cross-sell capabilities.”
The bank says its net cost for the deal will be about $1.4-billion, after excluding excess capital to be acquired in the deal.
Including excess capital, RBC will pay between $3.1- and $3.8-billion.
U.S. business channel CNBC first reported on the deal, citing an unidentified source.
Ally Financial’s Canadian unit provides financing to nearly 600 auto dealerships across the country.
The finance company’s consumer business has about 450,000 loans outstanding.
“This transaction 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,” Ally chief executive officer Michael A. Carpenter said in a statement.
“The Canadian transaction is the second transaction in a week to support these goals. We continue to evaluate options for our remaining international operations in Europe and Latin America, and we are encouraged by the progress and interest in the businesses.”