General Motors Financial Co Inc, the new
captive finance arm of US manufacturer GM, has declared its bid to
acquire certain international components of Ally Financial,
the rebranded entity created from GMAC, GM’s
former finance arm.
Ally says it has received offers from nearly
30 bidders and expects to conclude any sales by the end of
2012.
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GM Financial has not confirmed which
international operations it has bid for, only that the acquisition,
if it went ahead, could more than double the company’s assets, debt
and liabilities. According to a regulatory filing at the start of
this week, GM Financial would incur “substantial amounts of
indebtedness” should the acquisition be successful.
Ally total international assets, according to Fitch Ratings, are
$31bn (£19.76bn), making up nearly 17% of Ally’s total consolidated
assets. International business, predominantly Germany, UK, Brazil,
Mexico and China (through a joint venture) for the company has
declined 47% since 2008, over which time North American
(US and Canada) business has grown by 46%.
‘Natural buyer’
Fitch, one of the three Nationally Recognized Statistical Rating
Organizations in the US alongside Standard & Poor’s and
Moody’s, has said a potential buyout by GM would benefit both
parties. GM would again have an international captive arm
to complement global sales while Ally would increase
short-term liquidity (at the possible loss of long-term
earnings).
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By GlobalDataAccording to a statement from Mohak Rao, director of the
Financial Institutions Group at Fitch, GM Financial
“appears to be a natural buyer for Ally’s international assets.” By
the end of 2011, 97% of Ally’s international new
vehicle wholesale financing, and 82% of it’s international new
vehicle retail financing, was for GM dealers and
customers.
Ally has been looking to offload finance, banking and insurance
operations in Europe, as well as Canada, Mexico and South America,
since May when its Residential Capital mortgage arm filed for
bankruptcy. Ally sold the European mortgage assets and operations
of Residential Capital, and the international insurance operations
of GMAC insurance in late 2010.
However,
first quarter results for the finance company showed profits
were up, with especially pleasing results for its UK business.
Currently,
GMAC is in competition to provide a high-profile retail finance
programme for GM-owned Vauxhall.
richard.brown@vrlfinancialnews.com
