The TD Bank Group of Toronto has acquired Chrysler Financial from Cerberus Capital Management of New York City for $6.3 billion in cash.
The deal apparently reduces Cerberus losses on its ill-timed acquisition of Chrysler from Daimler AG back in 2007. Cerberus paid $7.4 billion for Chrysler in August of 2007 and later got some additional consideration from Daimler for Chrysler assets in China but the investment in Chrysler’s automotive business was wiped out during the carmaker’s 2009 bankruptcy.
“This transaction with TD is the right next step for the future of these businesses, their employees and customers,” said Mark Neporent, Senior Managing Director and Chief Operating Officer, Cerberus. “It ensures that the acquired businesses will be part of a strong and well-capitalized financial institution, which will help create sustainable jobs,” he said.
Chrysler Financial nearly died two years ago when the auto industry was engulfed in the banking industry’s financial crisis in the winter of 2008 and 2009.
The deal gives Toronto Dominion all of Chrysler Financial’s processes and technology as well as its existing portfolio of retail assets on both sides of the border.
Following this transaction, the business, combined with TD’s current operations in Canada and the United States, will be positioned as a top 5 bank-owned auto lender in North America with substantial potential for growth, the firm projected.
“This transaction represents a unique opportunity to purchase a great organic growth platform at an attractive price,” said Ed Clark, Group President and CEO, TD.
“Chrysler Financial is a well-run business with the capacity for significantly higher returns over the next several years. This acquisition will allow us to leverage our lending expertise and financial strength to expand our presence in a large North American market with tremendous potential upside,” Clark said.
“Because we’re well-capitalized and a leading deposit franchise, we’ve been looking for opportunities to accelerate the growth of our loan book. This acquisition gives us that opportunity and also diversifies our lending portfolio.”
The acquisition will give TD a platform for asset generation in the North American automotive lending market, enabling it to significantly grow its consumer loan portfolio.
In addition to the existing dealer relationships that TD has in Canada and the U.S., Chrysler Financial’s dealer clients serve approximately 1 million customers. TD expects that the business could generate a return on invested capital of approximately 20% in three to four years, once it is operating at a steady run rate, Clark said.
The acquisition also sets up a competition with Ally Bank, formerly known as General Motors Acceptance Corp., which was left a substantial chunk of Chrysler Financial’s old business once GM and the re-organized Chrysler Group emerged from a structured bankruptcy.