Ally to sell Canada auto finance operations

Associated Press Modified: October 23, 2012 at 10:00 am •  Published: October 23, 2012
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DETROIT (AP) — Ally Financial Inc., the former finance arm of General Motors that was bailed out by the U.S. government, is selling its Canadian auto finance unit to Royal Bank of Canada for $4.1 billion.

The deal, expected to close early next year, is part of Ally's plan to accelerate repayment of the $17.2 billion bailout, but it was unclear Tuesday exactly when the government would get more money. So far Ally has repaid $5.8 billion. The U.S. Treasury owns 74 percent of Ally common stock plus $5.9 billion of preferred stock.

Ally said in a statement that RBC will pay a $620 million premium over book value to buy Ally Credit Canada Limited and ResMor Trust. Book value for the third quarter was about $3.5 billion. Ally Credit Canada had about $9.4 billion in assets as of Sept. 30 and is among the largest auto financing businesses in Canada. ResMor Trust offers savings products to consumers and had about $4.2 billion in assets.

It's the second asset sale in the past week for Detroit-based Ally Financial. On Thursday it reached a deal to sell its Mexican insurance business, ABA Seguros, to Swiss insurance company ACE Group for $865 million.

"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," Ally CEO Michael Carpenter said in a statement.

Ally said it is still discussing the mechanics of the repayment, which could come through an initial public stock offering or a possible buyback of the $5.9 billion in preferred shares.

"We haven't disclosed what the path will be," spokeswoman Gina Proia said. "We are encouraged at the progress so far and the value that these operations have gleaned."

Ally is still evaluating the sale of operations in Europe and Latin America and said that it expects to announce plans in November.