Synchrony Financial has agreed to acquire Ally Financial’s point-of-sale financing business, including $2.2 billion of loan receivables, the companies announced Friday.
The sale includes relationships with nearly 2,500 merchant locations and more than 450,000 active borrowers in home improvement services and healthcare.
Financial terms of the transaction, expected to close this quarter, were not disclosed.
But CFO Brian Wenzel, during Synchrony’s fourth-quarter earnings call Tuesday, said the company purchased the loan portfolio “at a discount,” without elaborating further.
With inorganic opportunities, “it has to be the right thing, it has to be priced incredibly well, which we feel we got with Ally Lending,” Wenzel said.
The purchase allows Synchrony to expand its home specialty financing in roofing, windows and electrical services, CEO Brian Doubles added.
“This multi-product presentation furthers our product diversification strategy, delivering consumer choice while maximizing conversion and sales for our partners,” Doubles said Tuesday, adding that he and outgoing Ally CEO Jeffrey Brown had discussed the potential acquisition since the first half of 2023.
“This wasn’t a scaled business for Ally, but on our side, this is absolutely a scaled business,” Doubles said Tuesday. “This is exactly the type of acquisition that we look for. These are businesses and industries that we know really well.”
The deal is expected to help bolster Ally’s common equity tier 1 capital by roughly 15 basis points.
“Today’s agreement to sell Ally Lending is part of a broader initiative to invest resources in growing scale businesses and strengthening relationships with dealer customers and consumers,” Brown said in a statement. “This transaction allows us to continue to be disciplined in allocating capital to optimize risk-adjusted returns as we manage through a dynamic operating environment.”
Synchrony aims to offer both revolving credit and installment loans at the point of sale in the home improvement vertical.
The acquisition would help the Stamford, Connecticut-based company realize an “attractive” internal rate of return with a roughly 3½-year tangible book value earnback, the statement said.
The selloff comes at a time of great turnover at Ally. The lender this month announced 38-year company veteran Doug Timmerman would become interim CEO starting Feb. 1. Since Brown announced he was stepping down, Ally’s consumer-banking chief and general counsel have either left or announced a timeline for their departure. Ally also began cutting its workforce in October to manage staffing expenses.
— Caitlin Mullen contributed to this report.