Toronto-Dominion Bank will buy Chrysler Financial from private equity firm Cerberus Capital Management for $6.3 billion, making Canada’s No. 2 bank one of North America’s top five bank-owned auto lenders.
TD said today the cash purchase consists of net assets of $5.9 billion and about $400 million in goodwill.
Under the terms of the agreement, Toronto-Dominion’s U.S. unit — TD Bank — will acquire Chrysler Financial in the United States, and TD will acquire Chrysler Financial in Canada.
TD, which has been looking to expand its loan book, said the deal will give it all of Chrysler Financial’s processes and technology as well as its existing portfolio of retail assets.
The deal is just the latest in a series of foreign asset purchases by Canada’s big banks, which exited the financial crisis in stronger shape than most rivals, and have been seeking to capitalize by buying up assets.
“This transaction represents a unique opportunity to purchase a great organic-growth platform at an attractive price,” Ed Clark, chief executive of TD, said in a statement.
“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.”
TD said the addition of Chrysler Financial’s dealer clients, which serve about 1 million customers, could generate a return on invested capital of about 20 percent in three to four years.
Chrysler Financial, the former lending arm of the automaker, had its operations reduced as part of a U.S. government-sponsored restructuring of Chrysler and General Motors last year.
Cerberus bought Chrysler in 2007, but lost control of the automaker during its restructuring. It held on to the financing company.
Ally Financial Inc, the auto and mortgage lender formerly known as GMAC, became the preferred lender to Chrysler in connection with the restructuring.
TD’s U.S. operations include the TD Bank network on the East Coast, and it owns just under half of online broker TD Ameritrade TD has made small U.S. retail bank acquisitions in the last two years and bought Commerce Bancorp Inc for $7.7 billion in 2007.
TD said it does not intend to issue common equity in connection with the deal.