GM Acquiring Ally Financial’s International Operations For $4.2 Billion

General Motors has acquired Ally Financial’s international operations.  Ally agreed to sell their European and Latin American businesses as well as a share of a joint venture in China to GM’s financial arm for around $4.2 billion.  Ally Financial has been looking to raise money to help pay back their government bailouts.

The Obama administration invested in Ally as part of a bailout for the auto industry in 2009.  Ally has stabilized since then and they have a major focus on their online banking operations.  The federal government still owns around 74% of Ally’s common shares and $5.9 billion worth of convertible preferred securities.

The Treasury Department has been able to recover about $5.9 billion from their investment in Ally so far largely by selling shares and from receiving dividend payments.  Ally Financial is looking to go public, but the current market conditions are unfavorable.

This is why they are selling their assets to raise cash.  They sold off a Mexican insurance division for $865 million and their Canadian arm for $4.1 billion.

“Our goals were to find the best solution for each of the businesses, while also maximizing shareholder value, and we believe those goals have been achieved,” stated Ally Financial CEO Michael A. Carpenter.

Ally Financial used to be owned by GM and it was called GMAC six years ago.  The deal is being struck through GM’s financial arm built in part through the 2010 acquisition of AmeriCredit for $3.5 billion.  The operations being sold include auto finance units in Germany, Britain, and Brazil totaling around $16.1 billion in assets.

“G.M. is entering the most aggressive rollout of new vehicles in its history, and this acquisition will make us an even more formidable competitor by ensuring that competitive financing is available to our customers and dealers around the world,” stated GM CFO Dan Ammann.

GM is paying a premium to tangible book value of around $550 million according to The New York Times.

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This article was written by Amit Chowdhry. You can follow me at @amitchowdhry or on Google+ at
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