() (NYSE:RY), Canada's largest bank by assets, has inked a deal today to acquire the Canadian auto finance and deposit business of Ally Financial, for a net purchase price of $1.4 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," said group head of personal and commerical banking with RBC, Dave McKay.?
"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 Ally Financial Canadian auto finance arm offers inventory financing to more than 580 auto dealerships across the country, while its consumer business offers retail financing to Canadian consumers through around 1,600 dealerships, with around 450,000 consumer loans.?
The book value of the assets being acquired ? as of September 30 ? was $3.4-billion, RBC said in a statement.
The bank's actual investment, net of excess capital, is $1.4 billion, while the total consideration is between $3.1 and $3.8 billion, subject to certain closing adjustments and including the excess capital.?
RBC said the combination makes it the largest auto financing lender in Canada, with around $24 billion in receivables, offering floor plan financing to more than 890 dealerships.?
RBC's consumer business will offer consumers financing through roughly 4,000 dealerships; the combined portfolio will have more than one million consumer loans.
The Canadian bank said it anticipates the Ally Canada business to generate around $120 million in net income in the first 12 months after closing, before transaction and integration costs and amortization of intangibles.?
Meanwhile, RBC also said it has 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.
RBC said the legal entities being acquired include Ally Credit Canada and ResMor Trust Company. The deal, subject to necessary approvals, is expected to close in the first quarter of 2013.
Ally is the former General Motors Acceptance Corp., the financing arm of GM. It received a $17-billion bailout from the U.S. government during the financial crisis, paying back $5.8-billion so far, including dividends.
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 said in a separate release.?
Based on the third quarter total equity for the Canadian operations, Ally also said it would receive around US$4.1 billion in proceeds from the transaction. ? ?
Shares in Royal Bank were down almost 3 per cent in Toronto on Tuesday.?
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