By Synchrony Financial, a consumer financial services company, has announced its plans to acquire Ally Financial’s point-of-sale financing business, which includes $2.2 billion of loan receivables. The acquisition has been made official through a definitive agreement between the two companies.
Expanding Synchrony’s Multi-Product Strategy
With this acquisition, Synchrony aims to expand its multi-product strategy by offering its revolving credit and promotional financing products to Ally Lending’s merchants. This move will allow Synchrony to extend its services to nearly 2,500 merchant locations and support over 450,000 active borrowers in the home improvement services and healthcare sectors.
Strategic Growth in Specialty Areas
In addition to expanding its services, Synchrony also plans to increase its presence in high-growth specialty areas such as roofing, HVAC, and windows. By entering these markets, Synchrony hopes to capitalize on their potential and further strengthen its position in the industry.
Positive Outlook for Synchrony
Synchrony is optimistic about the acquisition’s impact on its earnings per share. It anticipates that the deal will be accretive to full-year earnings per share in 2024, excluding the initial reserve build for credit losses at the time of acquisition. Furthermore, the company expects an attractive internal rate of return, with a three-and-a-half-year tangible book value earn-back.
Benefits for Ally Financial
For Ally Financial, the sale of its point-of-sale financing business will have positive effects on various financial metrics. The transaction is expected to increase Ally’s common equity tier 1 ratio, reflecting its capital strength in comparison to company assets. It will also be modestly accretive to both tangible book value and earnings per share in 2024.
Closing the Deal
The acquisition is set to close in the first quarter of this year, signaling an exciting new chapter for both Synchrony Financial and Ally Financial.
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