Toronto-Dominion Bank has agreed to buy Chrysler Financial, the automakers old lending arm, from private equity firm Cerberus Capital Management for $6.3 billion, the companies said on Tuesday.
TD, Canada's No. 2 bank, said the purchase is comprised of net assets of $5.9 billion and about $400 million in goodwill.
TD said it does not intend to issue common equity in connection with the deal.
Cerberus acquired the lender when it bought most of the automaker for $7.4 billion in 2007. Cerberus lost control of Chrysler when the automaker nearly ran out of cash and faced liquidation in 2008.
TD Bank expects to rebrand Chrysler Financial under the TD brand by spring 2011. The acquisition is expected to add about $100 million in adjusted earnings in 2012, the first full year of operations.
The deal is expected to close in TD's fiscal 2011 second quarter, pending regulatory approvals and other conditions.
Toronto-Dominion CEO Ed Clark said the bank is looking to accelerate growth in the U.S and this deal makes them a top five North American auto lender.
"We're taking advantage of a disruptive market to add on assets that in the heydey you could never buy for these kind of prices," Clark said in an interview with The Associated Press. "We're already a top 10 player in the U.S. We're getting even bigger."
The deal is just the latest in a series of foreign asset purchases by Canada's big banks, which exited the financial crisis in stronger shape than most rivals, and have been seeking to capitalize by buying up assets. Last week, Canada's Bank of Montreal agreed to buy troubled Wisconsin lender Marshall & Ilsley Corp for $4.1 billion in stock.
Toronto-Dominion Bank has expanded its U.S. presence in recent years with the purchase of New Jersey-based Commerce Bancorp in what has been its largest acquisition. TD also bought smaller, troubled banks in the Carolinas and Florida such as South Carolina-based South Financial Group. Earlier this year, TD agreed to buy the risky assets of three insolvent Florida banks worth $3.8 billion. TD didn't have a presence in U.S. six years ago, but now has about 1,300 branches in the U.S. compared to about 1,100 in Canada.
"We're not in any hurry to do anything more but we'll keep our eyes out, as long as they are small. I define that as $10 billion in assets or less," Clark told the AP. "We said when we went into the United States that we would go big or go home and then we did a series of small deals, but those small deals have now put us in the top 10 in terms of deposits."
