Royal Bank of Canada announced today its plans to acquire the Canadian division of Ally Financial’s auto finance and deposit business. Still subject to closing adjustments, the acquisition will result in a total consideration of $3.1 to $3.8 billion. RBC has entered into this agreement in an effort to strategically align itself as the leading provider of financial services in Canada.
"Ally Canada will add significant scale to our existing consumer and commercial auto financing business and will strengthen RBC's position as a leader in the Canadian auto finance industry," said Dave McKay, group head, Personal & Commercial Banking, RBC. "This is a strong business with favourable industry dynamics and the combination with RBC provides opportunities to leverage our existing strengths and cross-sell capabilities."
Ally Canada’s auto finance business offers inventory financing to more than 580 auto dealerships across Canada as well as retail financing to Canadian consumers through an estimated 1,600 dealerships. Currently, the business has 450,000 active consumer loans.
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RBC believes combining its current operations with Ally Canada’s will lead RBC toward becoming a leader in Canadian auto financing. With both company operations combined, RBC’s auto finance business will have an estimated $24 billion in receivables, will work with 890 dealerships providing floor plan financing and offer consumer financing at 4,000 dealerships. Auto financing at RBC will have one million consumer loans.
RBC believes the acquisition will generate an estimated $120 million in net income within the first year after transaction closure which is expected to close in the first quarter of 2013.