GM Financial agrees a $4.2bn deal for Ally Financial’s non-US auto financing operation

Cars on a motorway in Shanghai, China

US General Motors Financial Company Inc, or GM Financial, said it had agreed to buy Ally Financial Inc’s automotive financing activities in Latin America, Europe and China for around USD4.2bn (EUR3.3bn).

GM Financial, which is a wholly-owned auto financing unit of carmaker General Motors Co (NYSE:GM), will pay a premium of about USD550m to the third quarter tangible book value of the operations being purchased. The vehicle manufacturer will contribute some USD2bn in cash to its unit so it could fund the transaction.

The deal calls for GM Financial to buy operations in Brazil, Mexico, Colombia, Chile, Germany, the UK, France, Italy, Belgium, the Netherlands, Sweden, Switzerland and Austria. In addition, the company will take Ally’s 40% stake in its Chinese joint venture GMAC-SAIC Automotive Finance Company. The transaction is seen to close in stages during next year, after obtaining the needed regulatory nods.

The acquisition is expected to double GM Financial’s assets to approximately USD33bn, while its liabilities will go up to around USD27bn from the current amount of USD12bn. It will also add between USD300m and USD400m to the buyer’s annual EBT, bringing the pro forma EBT run rate to some USD1bn.

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