--Sale includes auto-finance and deposit businesses
--RBC says combined business will have about $24 billion in
receivables
--Ally Financial selling international operations to help repay
U.S. government bailout
(Adds details about Ally Credit Canada, and Europe and Latin
America businesses.)
By Andrew R. Johnson
Ally Financial Inc. said Tuesday it will sell its Canadian
assets to Royal Bank of Canada (RY, RY.T) in a deal the
government-owned auto lender valued at $4.1 billion.
The sale is Ally's latest move to shed international operations
as it works to raise money to help pay back a U.S. government
bailout that topped $17 billion.
The operations include Ally's Canada auto-finance operation,
Ally Credit Canada Ltd., and ResMor Trust. The company said it
would receive a premium of $620 million to book value, which was
about $3.5 billion as of the third quarter.
"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," Michael Carpenter, chief executive officer of
Ally, said in a statement.
RBC, Canada's largest bank by assets, is putting to work at home
proceeds from the sale earlier this year of its failed foray into
U.S. retail banking to PNC Financial Services Group Inc. (PNC) for
$3.62 billion.
"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 for RBC, said
in a statement.
Ally's Canadian operations are based in Toronto and had $13.6
billion of assets as of the end of the third quarter, the company
said. Ally Credit Canada had about $9.4 billion in assets, while
ResMor Trust, which offers deposit products through independent
brokers and savings products directly to consumers, had $4.2
billion in assets.
The auto-finance business offers floor-plan financing to more
than 580 auto dealerships and retail financing to Canadian
consumers through about 1,600 dealerships, RBC said. The business
has about 450,000 loans.
RBC said the combination of the Ally business with its own will
result in an auto-financing operation with about $24 billion in
receivables that offers floor-plan financing to more than 890
dealerships and consumer loans through about 4,000 dealerships.
The Ally Canada business is expected to generate $120 million in
net income on a standalone basis in the first 12 months after
closing before integration and other costs, RBC said.
The deal is subject to regulatory approval and is expected to
close in the first quarter of 2013.
Last week, the Detroit-based Ally, the former financing arm of
General Motors Co. (GM), said it reached a deal to sell its Mexican
insurance business, AGA Seguros, to Swiss insurer Ace Ltd. (ACE)
for $865 million.
Ally's plan to sell its international operations, which included
more than $30 billion in assets overall, coincided with the
bankruptcy filing of its mortgage subsidiary, Residential Capital,
in May. By severing itself from ResCap and selling the
international operations, the company hopes to put itself in a
better position to pay back its outstanding bailout and focus on
its core U.S. auto-lending business and online bank.
The company also has international businesses in Europe and
Latin America and said it expects to announce plans for these
operations next month.
GM has been vocal about its desire to acquire Ally's operations
in Europe and Latin America, though Ally remains in talks with a
number of potential buyers for those assets, mainly financial
institutions, people familiar with the matter said.
GM and Ally haven't yet reached an agreement over the value of
the operations GM is seeking, these people said. Earlier efforts by
GM to buy Ally operations in the U.S. fell apart after the two
sides couldn't agree on a price. In 2010, Ally turned down GM's
offer to buy its wholesale business for $5 billion, people familiar
with the matter said at the time.
The government owns 74% of Ally after funneling $17.2 billion to
the company as part of its broader rescue of the auto industry in
2009. Earlier this month, Ally said it will have returned $5.8
billion to the U.S. Treasury Department, including a dividend
payment scheduled for next month.
--Caroline Van Hasselt and Sharon Terlep contributed to this
story.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com