General Motors Financial Company (GM Financial) is set to acquire Ally Financial’s international automotive financing operations, including GMAC in the UK, at a cost of $4.2bn (£2.6bn).
Created in 2010, GM Financial is the wholly-owned finance subsidiary of manufacturer General Motors (GM) which previously offered finance through GMAC and still holds a fractional stake in the company.
Ally bought the finance operations of GM outside the US in 2006 as the carmaker’s business contracted in the mid-2000s. Those acquired operations were renamed Ally, except in the UK where it still operates under the trading style of GMAC.
At the end of 2011, 97% of Ally’s wholesale vehicle financing and 82% of its retail financing was for GM dealers and customers.
Now, with Ally three-quarters-owned by the US government; and GM recovered from the bankruptcy of its Chrysler brand, and expiry of the Pontiac and Saturn brands, much of that business is returning to what appears to be its "natural buyer".
Despite this, Ally’s operation in Canada was sold to the Royal Bank of Canada, not GM, in October for $4.1bn.
Subject to regulatory approval, from mid-2013 GM Financial will be running Ally’s motor financing operations in Austria, Belgium, Brazil, Mexico, Colombia, Chile, France, Germany, Italy, the Netherlands, Sweden and Switzerland, as well as Ally’s 40% share of a joint venture in China with SAIC.
GM Financial now expects its liabilities, including consolidated debt, to increase from $12bn to $27bn. As expected by GM in August, the assets of GM Financial will double to approximately $33bn.
The acquisition includes an injection of $2bn by GM into GM Financial to boost equity and ensure a pro-forma capital structure.
GM is predicting the transaction will add between $300m and $400m to GM Financial’s annual pre-tax earnings.
The deal comes as GM begins its most "aggressive rollout" of new cars and engines following heavy losses in European sales, although an alliance with PSA announced in March was held up this month following the French government bailout of Banque PSA, the captive finance provider to Peugeot and Citroën.
Further analysis of the acquisition and the domestic and international performance of GMAC and Vauxhall will be published in the December issue of Motor Finance magazine.