Ally Financial, the former finance division of General Motors that was bailed out by the U.S. government, is selling its Canadian auto finance unit to Royal Bank of Canada for $4.1 billion.
The deal is expected to close early next year. The move is part of Ally’s plan to accelerate repayment of the $17.2 billion bailout, with the company having paid $5.8 million so far. It is unclear when the government will get more money. Ally said it is still discussing the details of the repayment, which could happen as an initial public stock offering or a possible buyback of the $5.9 billion in preferred shares. The U.S. Treasury owns 74 percent of Ally common stock plus $5.9 billion of preferred stock.
According to a statement from Ally, RBC will pay a $620 million premium over book value to buy Ally Credit Canada Limited and ResMor Trust. Book value for the third quarter was about $3.5 billion. Ally Credit Canada, which had about $9.4 billion in assets as of September 30, is among Canada’s largest auto financing businesses. ResMor Trust offers savings products to consumers and had about $4.2 billion in assets.