Auto lender Ally Financial Inc on Tuesday has announced it’s buying subprime lender CardWorks for $2.65 billion. Ally Fin. looks to diversify its consumer product offerings, supported by a growing and low-cost deposit base.
Ally will pay $1.35 billion in cash and $1.3 billion in stock for CardWorks. CardWorks, which is a non-prime credit card and consumer finance lender, has $4.7 billion in assets and $2.9 billion in deposits.
It is also a bold move away from auto lending into the credit card and merchant acquiring space, so shareholders may also be waiting to see how well the company manages to integrate CardWorks into its current play.
“This acquisition serves as an important milestone in Ally’s evolution to be a full-service financial provider for our customers,” says Ally’s CEO Jeffrey Brown in a statement. “Beyond the compelling strategic rationale and financial enhancements this transaction brings, CardWorks is an ideal cultural fit for Ally.
“Both companies share a deep-rooted history of disciplined risk management and an obsession over the customer. I’m thrilled to welcome CardWorks to the Ally team and look forward to adding value for all of our stakeholders,” Brown adds.
The boards of both the companies have approved the deal, which is expected to close in the third quarter of 2020.