Synchrony and Ally Financial recently announced that they have entered into a definitive agreement for Synchrony to acquire Ally’s point-of-sale financing business, including $2.2 billion of loan receivables. The portfolio includes relationships with nearly 2,500 merchant locations and supports more than 450,000 active borrowers in home improvement services and healthcare.
With this acquisition, Synchrony will create a differentiated solution in the industry – simultaneously offering revolving credit and installment loans at the point of sale in the home improvement vertical. And this expands Synchrony’s multi-product strategy by extending its revolving credit and promotional financing products to Ally Lending’s merchants. The deal expands Synchrony’s reach in high-growth specialty areas like roofing, HVAC, and windows. Plus, the Ally Lending health portfolio complements Synchrony’s existing Health and Wellness platform and extends Synchrony’s reach in cosmetics, audiology, and dentistry.
Ally expects the sale to increase the company’s CET1 ratio by about 15 basis points upon closing and be modestly accretive to tangible book value and earnings per share in 2024.
Synchrony also expects the acquisition to be accretive to full-year 2024 earnings per share, excluding the impact of the initial reserve built for credit losses at acquisition. The acquisition is expected to realize an attractive internal rate of return for Synchrony with an approximate three-and-a-half-year tangible book value earn back. Synchrony will provide more information regarding the acquisition during the fourth quarter 2023 earnings conference call on Tuesday, January 23, 2024.
Synchrony and Ally will work together to ensure a smooth transition for merchants, customers and employees. The transaction is expected to close in the first quarter of 2024, subject to the completion of customary closing conditions.
KEY QUOTES:
“This deal represents a significant and exciting growth opportunity for Synchrony – it’s a strong strategic fit that will unlock value and operational efficiency by integrating products and teams in our expanding platforms of home improvement and health and wellness. This accretive acquisition enhances Synchrony’s position by offering our multi-product portfolio to nearly 2,500 Ally Lending merchant locations, and enables us to achieve attractive economies of scale while further diversifying our merchant base.”
– Synchrony President and CEO Brian Doubles
“Today’s agreement to sell Ally Lending is part of a broader initiative to invest resources in growing scale businesses and strengthening relationships with dealer customers and consumers. This transaction allows us to continue to be disciplined in allocating capital to optimize risk-adjusted returns as we manage through a dynamic operating environment.”
– Ally Financial Chief Executive Officer Jeff (JB) Brown
