A Royal Bank of Canada sign is seen in downtown Toronto. The bank’s wealth-management unit has some $325-billion in assets under management.MARK BLINCH/Reuters
Royal Bank of Canada is on the verge of buying Ally Financial's Canadian arm.
The sale is part of a global restructuring that Ally first announced in May. Early in the auction process General Motors Co. described itself as the "natural buyer", as Ally was previously owned by GM and was once known as General Motors Acceptance Corp.
However, GM said it would only go so far to bring the assets back under its belt, and despite its attempts, RBC is now the lead bidder, according to someone familiar with the auction. Talks are now in advanced stages.
Ally's Canadian division is coveted by the country's banks because it is rare to have assets suddenly become available in this heavily saturated market. Toronto Dominion Bank has also been involved in bidding, but it isn't clear if it will attempt to top RBC's leading offer.
According to CNBC, the deal could be worth $4-billion. However, the majority of Ally's Canadian assets are auto loans. So while the acquisition could ultimately be worth billions of dollars, the acquirer may in large part be shelling out cash for money that will be paid back.
The same situation unfolded in 2010 when Toronto-Dominion Bank bought cash-strapped Chrysler Financial Corp.'s lending arm for $6.3-billion.
Ally's assets currently total $4.2-billion, but $2.8-billion of those are auto loans, according to regulatory filings. The bank also has about $1.5-billion in deposits.
Should the deal go through soon, it will mark Ally's second sale in as many weeks. Last Thursday the firm announced the sale of its Mexican insurance unit to ACE Group for $865-million.
RBC, TD, GM and Ally all declined to comment.
Tim Kiladze