Synchrony to acquire Ally Financial's POS financing business

By acquiring Ally Financial, Synchrony intends to develop a differentiated solution in the industry that can simultaneously provide both revolving credit and instalment loans at the POS in the home improvement sector. Through this, the company can expand its multi-product strategy by increasing its revolving credit and promotional financing products to Ally Lending’s merchants. Moreover, the agreement focuses on extending Synchrony’s reach in high-growth specialty sectors, including roofing, HVAC, and windows. Also, the Ally Lending portfolio aligns with Synchrony’s existing Health and Wellness platform and can increase the company’s reach in cosmetics, audiology, and dentistry.

According to Synchrony’s officials, the agreement represents a growth opportunity for Synchrony, as its strategic fit can provide operational efficiency by integrating products and teams into the company’s platform of home improvement and health and wellness. The acquisition focuses on improving the company’s position by providing its multi-product portfolio to Ally Lending’s merchant locations and allows it to achieve economies of scale while diversifying its merchant base. Representatives from Ally Financial stated that the decision to sell Ally Lending is part of a broader strategy to invest resources in expanding scale businesses and solidifying relationships with dealer customers and consumers. The agreement with Synchrony enables the company to continue to allocate capital to optimise risk-adjusted returns as it manages a dynamic operating environment.

Ally Financial projects the sale to increase its CET1 ratio by nearly 15 basis points upon closing and be accretive to tangible book value and earnings per share in 2024. Furthermore, Synchrony projects the acquisition to be accretive to full-year 2024 earnings per share, apart from the impact of the initial reserve developed for credit losses at acquisition. The acquisition of Ally’s POS financing business is set to realise an improved rate of return for the company with an approximate three-and-a-half-year book value earnback. The press release also mentions that Synchrony intends to offer more information regarding the acquisition in the upcoming period.

Additionally, the two companies aim to work together to ensure an efficient transition for merchants, customers, and employees. The transaction is projected to close in the first quarter of 2024, subject to the conclusion of established closing requirements.

Source: Link