Synchrony and Ally Financial Reach Agreement on Sale of Ally's Point-of-Sale Financing Business
- Synchrony's acquisition of Ally's point of sale financing business expands its reach in the home improvement and health and wellness financing industry.
- The acquisition is expected to be accretive to Synchrony's earnings per share in 2024, with an attractive internal rate of return and a three-and-a-half-year tangible book value earnback.
- Ally Financial expects the sale to increase the company's CET1 ratio by approximately 15 basis points upon closing and be modestly accretive to tangible book value and earnings per share in 2024.
- None.
Insights
The acquisition of Ally's point of sale financing business by Synchrony is a strategic move that could significantly bolster Synchrony's market presence in the home improvement and health and wellness financing sectors. The addition of $2.2 billion in loan receivables and nearly 2,500 merchant locations indicates a considerable expansion of Synchrony's credit portfolio. The ability to offer both revolving credit and installment loans provides a competitive edge and could potentially increase customer loyalty and transaction volume.
From a financial perspective, the transaction is expected to be accretive to Synchrony's earnings per share in 2024, which could be a positive signal to investors regarding the company's profitability post-acquisition. The deal also appears to be well-structured in terms of capital management, with an anticipated internal rate of return and a tangible book value earnback period of approximately three-and-a-half years. These metrics suggest a prudent use of capital with the potential for value creation over time.
With the acquisition, Synchrony is poised to deepen its penetration in the high-growth specialty areas of roofing, HVAC and windows, which are significant segments within the home improvement industry. The expansion into these areas could open new revenue streams and diversify Synchrony's merchant base. Additionally, the integration with Ally Lending's health portfolio complements and broadens Synchrony's existing Health and Wellness platform, allowing for a more comprehensive suite of financing options in cosmetic, audiology and dentistry services.
It's also important to note the potential for operational efficiency gains through the integration of products and teams. This could lead to improved service offerings and streamlined processes, enhancing the overall customer experience. The strategic fit of this acquisition could provide Synchrony with a stronger value proposition to both merchants and consumers, which is critical in the competitive point of sale financing landscape.
The decision by Ally Financial to divest its point of sale financing business and focus on scaling other segments of its operations reflects a strategic reallocation of resources that could optimize the company's risk-adjusted returns. The expected increase in the CET1 ratio by approximately 15 basis points is indicative of a strengthened capital position, which can be advantageous in a dynamic operating environment. This capital reallocation may enable Ally to invest more aggressively in its core businesses, potentially leading to enhanced market competitiveness and shareholder value in the long term.
The transaction's timing is also noteworthy, as it comes at a juncture where economic conditions and consumer financing behaviors are evolving. The ability of both companies to adapt and realign their business strategies through such acquisitions could be a testament to their agility and foresight in navigating market shifts.
Acquisition Enhances Synchrony's Reach and Scale in Home Improvement and Health and Wellness Financing;
Sale Enables Ally To Invest Its Resources in Growing Scale Businesses and Strengthening Relationships with Dealer Customers and Consumers
Through this acquisition, Synchrony will create a differentiated solution in the industry -- simultaneously offering both revolving credit and installment loans at the point-of-sale in the home improvement vertical. This expands Synchrony's multi-product strategy by extending its revolving credit and promotional financing products to Ally Lending's merchants. The deal also expands Synchrony's reach in high-growth specialty areas such as roofing, HVAC and windows. Further, the Ally Lending health portfolio complements Synchrony's existing Health and Wellness platform and extends Synchrony's reach in cosmetic, audiology and dentistry.
"This deal represents a significant and exciting growth opportunity for Synchrony – it's a strong strategic fit that will unlock value and operational efficiency by integrating products and teams in our expanding platforms of home improvement and health and wellness," said Synchrony President and CEO Brian Doubles. "This accretive acquisition enhances Synchrony's position by offering our multi-product portfolio to nearly 2,500 Ally Lending merchant locations, and enables us to achieve attractive economies of scale while further diversifying our merchant base."
"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," said Ally Financial Chief Executive Officer Jeff (JB) Brown. "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."
Ally expects the sale to increase the company's CET1 ratio by approximately 15 basis points upon closing and be modestly accretive to tangible book value and earnings per share in 2024.
Synchrony expects the acquisition to be accretive to full year 2024 earnings per share, excluding the impact of the initial reserve build for credit losses at acquisition. The acquisition is expected to realize an attractive internal rate of return for Synchrony with an approximate three-and-a-half-year tangible book value earnback. Synchrony will provide more information regarding the acquisition during its fourth quarter 2023 earnings conference call on Tuesday, January 23, 2024.
Synchrony and Ally will work together to ensure a smooth transition for merchants, customers and employees. The transaction is expected to close in the first quarter of 2024, subject to the completion of customary closing conditions.
*Amount of loan receivables as of December 31, 2023.
About Synchrony
Synchrony (NYSE: SYF) is a premier consumer financial services company delivering one of the industry's most complete digitally-enabled product suites. Our experience, expertise and scale encompass a broad spectrum of industries including digital, health and wellness, retail, telecommunications, home, auto, outdoor, pet and more. We have an established and diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers, which we refer to as our "partners." We connect our partners and consumers through our dynamic financial ecosystem and provide them with a diverse set of financing solutions and innovative digital capabilities to address their specific needs and deliver seamless, omnichannel experiences. We offer the right financing products to the right customers in their channel of choice. For more information, visit www.synchrony.com.
About Ally Financial
Ally Financial Inc. (NYSE: ALLY) is a financial services company with the nation's largest all-digital bank and an industry-leading auto financing business, driven by a mission to "Do It Right" and be a relentless ally for customers and communities. The company serves more than 11 million customers through a full range of online banking services (including deposits, mortgage, point-of-sale personal lending, and credit card products) and securities brokerage and investment advisory services. The company also includes a robust corporate finance business that offers capital for equity sponsors and middle-market companies, as well as auto financing and insurance offerings. For more information, please visit www.ally.com and follow @allyfinancial.
For more information and disclosures about Ally, visit https://www.ally.com/#disclosures.
For further images and news on Ally, please visit http://media.ally.com.
Forward-Looking Statements
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Synchrony Media Contact:
Lisa Lanspery
lisa.lanspery@synchrony.com
Synchrony Investor Contact:
Kathryn Miller
kathryn.miller@synchrony.com
Ally Communications (Media):
Peter Gilchrist
peter.gilchrist@ally.com
Ally Investor Relations:
Sean Leary
sean.leary@ally.com
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SOURCE Synchrony Financial
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