Yahoo Finance Ally Financial Vends 40% China Joint Venture Stake for $1B - Analyst Blog
The offloading of international operations of Ally Financial Inc. (ALLY) has finally been completed. Detroit-based major auto lender marked its exit from international holdings with the divestiture of its 40% stake in a joint venture in China to subsidiaries of General Motors Company (GM) – General Motors Financial Company, Inc. and GMAC UK PLC.
GM Motors Financial purchased 5% interest and GMAC UK purchased the remaining 35% interest in the China joint venture – SAIC-GMAC Automotive Finance Company Limited (previously known as GMAC-SAIC Automotive Finance Company Limited). The sale of this joint venture that runs auto finance operations in China fetched Ally Financial $1 billion. In relation to this transaction, the company anticipates to record an after-tax gain of around $400 million in first-quarter 2015.
Ally Financial entered into agreement to sell the China joint venture in Nov 2012 along with an agreement to sell its operations in Europe and Latin America to GM Motors Financial. The joint venture was then included in the discontinued operations of Ally Financial.
Ally Financial stated in its Nov 2012 release that the divestiture move comes in line with the company’s strategy to expedite repayment of U.S. Treasury’s remaining investment. During the 2008 financial crisis, Ally Financial had entered the Troubled Asset Relief Program (TARP), in an initiative to boost the auto industry in the U.S.
In 2013, GM Motors Financial acquired the international operations of Ally Financial in Europe and Latin America. In Dec 2014, Ally Financial announced that it has exited the TARP as the U.S. Department of the Treasury sold its residual 54.9 million shares of Ally common stock.
With respect to the latest transaction, Chief Executive Officer of Ally Financial, Michael A. Carpenter stated, “We are pleased to have completed the final step in selling our international holdings and, with the sale of the China interest, Ally has received $9.4 billion in total proceeds from the sales of its international operations.”
On GM Motors Financial’s part, the latest move marks the closing of the acquisition of the international operations of Ally Financial that it started over two years ago. Per the President and CEO Dan Berce of GM Motors Financial “This is an important step in our evolution as GM’s global captive finance company and in supporting its growth strategy. China is a significant market for GM and we want to ensure the availability of competitive financing for its customers and dealers.”
Ally Financial currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance space include Customers Bancorp, Inc. (CUBI) and Affiliated Managers Group Inc. (AMG). Both the stocks hold a Zacks Rank #1 (Strong Buy).
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GENERAL MOTORS (GM): Free Stock Analysis Report
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