Ally Financial Inc. announced earlier this week it had reached an agreement to sell its Canadian auto finance operation, Ally Credit Canada Limited, and ResMor Trust to Royal Bank of Canada, the country’s largest bank by assets and market capitalization.
The transaction is subject to regulatory approval and is expected to close in the first quarter of 2013.
Under the terms, Ally will receive an approximately US$620 million premium to book value, which for the third quarter of 2012 was approximately $3.5 billion. Based on the third quarter total equity for the Canadian operations, Ally would receive approximately US$4.1 billion in proceeds from this transaction.
“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,” said Ally chief Michael A. Carpenter.
“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.”
Carpenter added that international operations are strong franchises and that both the ABA Seguros and the Canadian transactions demonstrate the company’s goals of finding the best solutions for those businesses, while also maximizing shareholder value.
Ally's remaining international businesses include automotive finance operations in Europe and Latin America. The company expects to identify plans for these operations in November.
Ally's Canadian operations are based in Toronto and represent the largest single country of operations outside the U.S. with $13.6 billion in assets at the end of the third quarter 2012. The operations consist of Ally Credit Canada Limited and ResMor Trust, both subsidiaries of Ally.
Ally Credit Canada Limited is one of the largest auto finance companies in Canada with approximately $9.4 billion in assets at the end of the third quarter 2012. The business offers automotive financing and related services to dealers and their customers.
ResMor Trust offers deposit products through independent brokers as well as innovative savings products directly to consumers. ResMor had $3.8 billion in deposits and $4.2 billion in assets at the end of the third quarter 2012.
RBC is among the largest banks in the world, based on market capitalization. It is North America's leading diversified financial services company, and provides personal and commercial banking, wealth management services, insurance, corporate and investment banking and investor services on a global basis.