Stellantis took its first step toward creating a captive finance arm by agreeing to acquire Houston-based F1 Holdings Corp., parent company to First Investors Financial Services Group, an independent auto finance company for $285 million in cash, subject to adjustments and certain outstanding options from an investor group led by Gallatin Point Capital LLC.
“This transaction marks a significant milestone in Stellantis’ sales finance strategy in the critical U.S. market,” said Carlos Tavares, Stellantis CEO, in a statement.
First Investors has an outstanding financial and operational platform, underpinned by a strong management team, with vast experience in the auto finance space, Tavares said.
“Direct ownership of a finance company in the U.S. “is a white-space opportunity, which will allow Stellantis to provide our customers and dealers a complete range of financing options, including retail loans, leases, and floorplan financing in the near-to-medium term.”
Stellantis follows path trod by GM
The Stellantis deal uses a template set out by archrival General Motors, which in 2010 acquired a Dallas-based finance auto finance company, AmeriCredit Corp. The deal was completed shortly months after GM emerged from bankruptcy. AmeriCredit was renamed General Motors Financial and now is an integral part of the GM’s operations — including adding cash to the company’s bottom line.
In 2006, GM spun off GMAC, its then 87-year-old captive finance company, into a standalone entity, losing control year later as the financial losses from the lending of subprime mortgages that began under GM. GMAC was later taken over by the federal government’s troubled asset program in reemerged as Ally Bank in 2010, which is completely independent of GM.
As it went through bankruptcy and a federal bailout in 2009, the old Chrysler Group had sold off its own captive finance company to Toronto Dominion Bank, which still occupies Chrysler Financial’s old headquarters building in suburban Detroit.
After the automaker was reorganized during the combination with Italy’s Fiat Group, CEO Sergio Marchionne established an agreement for providing lending services through Stantander Bank, the largest bank in Spain. FCA also established the FCA BanK.
Take over has major objectives
Tavares said Stellantis’ strategic objective is to establish a U.S. captive finance company to support its sales and fully capitalize on its strong market position while creating long-term value for Stellantis shareholder
The acquisition of First Investors allows Stellantis to create a platform from which to grow a full-service captive finance organization.
Stellantis is the only major OEM currently operating in the U.S. without a captive auto finance company, Tavares noted. Even companies such Toyota, Daimler, Hyundai and Volkswagen have their own captive finances companies.
Good deal for First Investors
Becoming part of Stellantis provides long-term stability for our company and employees. We believe that there are significant untapped growth opportunities for First Investors under Stellantis ownership as we expand our product suite to support the auto sales growth of Stellantis. The First Investors management team is fully committed to ensuring a smooth and rapid integration into Stellantis.
Meanwhile, we remain committed to continuing to offer our loans and services to our existing network of dealers and current business partners.”
The Transaction is expected to close by the end of 2021, subject to customary closing conditions and regulatory approval.
First Investors is described as is an auto finance company engaged in originating and holding for investment automobile finance receivables and promissory notes originated by franchised automobile dealers.