RBC to Acquire Ally's Canadian Auto Finance
Business
Acquisition positions RBC as a leader in auto financing
in Canada
TORONTO, October 23, 2012 - Royal Bank of Canada (RY
on TSX and NYSE) today announced a definitive agreement to
acquire the Canadian auto finance and deposit business of
Ally Financial Inc. (“Ally Canada”) for a $1.4 billion
investment net of excess capital. Subject to certain closing
adjustments and including the excess capital, this results
in total consideration of $3.1 to $3.8 billion, depending
on the size of the dividend taken out by the seller prior
to closing. The acquisition aligns with RBC’s key strategic
priority to be 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.”
RBC is acquiring a leading Canadian auto finance business
that offers inventory (or “floor plan”) financing
to more than 580 auto dealerships across the country. Its
consumer business offers retail financing to Canadian consumers
through approximately 1,600 dealerships and has approximately
450,000 consumer loans. The legal entities being acquired
include Ally Credit Canada Ltd. and ResMor Trust Company.
The book value of the acquired business as of September 30,
2012 was
$3.4 billion, unadjusted for the pre-closing dividend. The
net investment of $1.4 billion includes a premium to book
value of $0.6 billion.
The combination of Ally Canada with RBC’s existing business
will create a leading player in Canadian auto financing with
approximately $24 billion in receivables, offering floor plan
financing to more than 890 dealerships. RBC’s consumer
business will offer consumers financing through approximately
4,000 dealerships. The combined portfolio will have more than
one million consumer loans.
RBC expects the Ally Canada business to generate approximately
$120 million in net income on a standalone basis in the first
12 months after closing (before integration costs, amortization
of intangibles and transaction costs), based on estimated
average receivables of approximately $9 billion.
Today RBC also announced it has entered into an agreement
with General Motors of Canada to become a provider for its
subvented business upon close of the transaction. Subvented
loans are low rate consumer auto loans subsidized by the manufacturer.
The acquisition is expected to be modestly accretive to earnings
per share in the first year after closing. At closing it is
expected to reduce RBC’s July 31, 2012 Tier 1 capital
ratio of 13.0 per cent on a pro forma basis by approximately
60 bps. On an estimated Basel III basis, we expect our Common
Equity Tier 1 ratio to remain above eight per cent following
the close, given our strong capital position and internal
capital generation.
The transaction is subject to customary closing conditions,
including regulatory and other approvals, and is expected
to close in the first quarter of calendar 2013.
RBC Capital Markets served as financial advisor to Royal
Bank of Canada in this transaction.
Conference Call
A conference call is scheduled to take place on October 23,
2012, from 8:30 a.m. to 9:00 a.m. (ET) and will feature speeches
by RBC senior executives followed by a brief question and
answer period with analysts.
Interested parties can access this call live on a listen-only
basis via telephone using the following access numbers:
Local calls: 416-340-2217
North American toll-free: 866-696-5910
International toll-free: 800-8989-6336
The passcode for access on all numbers is 4139509#. Please
call between 8:20 a.m. and 8:30 a.m. (ET).
The presentation material referenced during the call will
be available on the website at www.rbc.com/investorrelations.
A recording of the conference call will be available after
9:30 a.m. (ET) on October 23, 2012 until January 22, 2013
via telephone at: 905-694-9451 (locally) or 800-408-3053 (North
American toll-free), passcode 7862644#.
About RBC
Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries
operate under the master brand name RBC. We are Canada’s
largest bank as measured by assets and market capitalization,
and are among the largest banks in the world, based on market
capitalization. We are one of North America’s leading
diversified financial services companies, and provide personal
and commercial banking, wealth management services, insurance,
corporate and investment banking and investor services on
a global basis. We employ approximately 80,000 full- and part-time
employees who serve more than 15 million personal, business,
public sector and institutional clients through offices in
Canada, the U.S. and 51 other countries. For more information,
please visit rbc.com.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release may be
deemed to be forward-looking statements under certain securities
laws, including the “safe harbor” provisions of
the United States Private Securities Litigation Reform Act
of 1995 and any applicable Canadian securities legislation.
These forward-looking statements include, but are not limited
to, statements about the expected effects of the acquisition
of Ally Financial Inc.’s Canadian auto finance operations,
the expected timing and scope of the acquisition and other
statements other than in relation to historical facts. Forward-looking
statements are typically identified by words such as “believe”,
“expect”, “foresee”, “forecast”,
“anticipate”, “intend”, “estimate”,
“goal”, “plan” and “project”
and similar expressions of future or conditional verbs such
as “will”, “may”, “should”,
“could”, or “would”.
By their very nature, forward-looking statements require
us to make assumptions and are subject to inherent risks and
uncertainties, which give rise to the possibility that our
predictions, forecasts, projections, expectations or conclusions
and other forward-looking information, including statements
about the acquisition of Ally Financial Inc.’s Canadian
auto finance operations by Royal Bank of Canada will not be
achieved. We caution readers not to place undue reliance on
these statements as a number of important factors could cause
our actual results to differ materially from the expectations
expressed in such forward-looking statements. These factors
include, but are not limited to the possibility that the proposed
transaction does not close when expected or at all because
required regulatory or other approvals are not received or
other conditions to the closing are not satisfied on a timely
basis or at all, that Royal Bank of Canada and Ally Financial
Inc. may be required to modify the terms and conditions of
the proposed transaction to achieve regulatory approval, or
that the anticipated benefits of the transaction are not realized
as a result of such things as the strength of the economy
and competitive factors in the areas where Royal Bank of Canada
and Ally Financial Inc. do business; the impact of changes
in the laws and regulations regulating financial services
and enforcement thereof; the effects of competition in the
markets in which Royal Bank of Canada and Ally Financial Inc.
operate; judicial or regulatory judgments and legal proceedings;
Royal Bank of Canada’s ability to complete the acquisition
and integration of Ally Financial Inc.’s Canadian auto
finance operations successfully; and other factors that may
affect future results of Royal Bank of Canada and Ally Financial
Inc.’s Canadian auto finance operations including timely
development and introduction of new products and services,
Royal Bank of Canada’s ability to cross-sell more products
to customers and technological changes.
We caution that the foregoing list of important factors is
not exhaustive. Additional information about these and other
factors can be found in our Q3 2012 Report to Shareholders
and 2011 Annual Report to Shareholders. Our material general
economic assumptions underlying the forward-looking statements
in this press release are set out in our 2011 Annual Report
under the heading “Overview and Outlook” and for
each business segment under the heading “Outlook and
priorities” as updated under the heading “Economic,
market and regulatory review and outlook” in our Q3 2012
Report to Shareholders. Except as required by law, Royal Bank
of Canada assumes no obligation to update the forward-looking
statements contained in this press release.
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Media Contacts:
Kerry Gaetano, Head, Corporate Communications, Personal &
Commercial Banking and Insurance,
kerry.gaetano@rbc.com,
905-816-5583 or 647-281-2931
Matt Gierasimczuk, Senior Communications Manager, matthew.gierasimczuk@rbc.com,
416-974-2124
Analyst Contacts:
Amy Cairncross, VP & Head, Investor Relations, amy.cairncross@rbc.com,
416-955-7803
Robert Colangelo,
Associate Director, Investor Relations,
416-955-2049
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