• Jul 22nd 2010 at 10:56AM
  • 36
General Motors has just announced its intent to acquire AmeriCredit Corp. According to the automaker, the move should give dealers an added finance option when it comes to putting car shoppers into a new vehicle. Since GM and GMAC parted ways back in 2006, buyers looking to purchase a car or truck from The General have faced tougher financing terms than in the past. Supposedly, the new deal with AmeriCredit will provide new opportunities for sub-prime borrowers. The total cost of the deal? A cool $3.5 billion in straight cash.
GM says that putting AmeriCredit under its wing is the next logical step in moving toward an IPO, and most analysts seem to agree. The carmaker had been criticized for not having an in-house financing arm in the past, but the new move should afford the company and its dealership network an added level of financing flexibility. It should also allow GM to return to leasing in a big way. The two companies have been working together extensively in recent months, and GM says that over 4,000 of its dealerships already have relationships with the lender.

The purchase has already been approved by the boards of both GM and AmeriCredit, and pending approval from the lender's stockholders, The General will purchase the finance company for $24.50 per share. As of writing, the company's stock is currently trading at $24.07 – up $4.36 on news of the purchase. Hit the jump for the GM press release. Thanks for the tips, Jeff and Sea Urchin!

[Sources: General Motors, TickerSpy]

Show full PR text
GM to Acquire AmeriCredit
* Will form core of GM's captive finance arm
* Bolsters retail financing options for dealers and consumers, supporting GM North America sales growth

DETROIT – To meet customer demand for leasing and non-prime financing for GM vehicles, General Motors and AmeriCredit Corp. (NYSE: ACF) today announced they have entered into a definitive agreement for GM to acquire AmeriCredit, one of the nation's leading independent auto finance companies, in an all-cash transaction valued at approximately $3.5 billion.

"This acquisition supports our efforts to design, build and sell the world's best vehicles by expanding the financing options we can offer to consumers who want to buy GM vehicles," said GM Chairman and Chief Executive Officer, Ed Whitacre. "Adding AmeriCredit to our team will improve our competitiveness in auto financing offerings, and I am very pleased to have them on board."

The acquisition establishes the core of a new GM captive financing arm that will enable GM to provide customers with a more complete range of financing options, while creating significant growth opportunities for both GM and AmeriCredit. Since GM and AmeriCredit launched a successful non-prime program in September 2009, GM's non-prime penetration has increased significantly. Upon completion of the transaction, AmeriCredit intends to also re-enter the leasing business which will provide expanded leasing availability for all GM customers.

Direct ownership of AmeriCredit's expertise will provide consistent availability of non-prime financing for GM customers throughout all economic cycles. While AmeriCredit already has relationships with approximately 4,000 GM dealers, this transaction will enhance dealer receptivity and improve sales penetration rates through coordinated GM branding and targeted customer marketing initiatives.

"With AmeriCredit providing us niche capabilities in leasing and non-prime financing, along with the continued strong support of Ally Financial and others for prime retail and dealer financing, we've set up a very competitive solution for our financing needs, which will be resilient through credit and business cycles," said GM Vice Chairman and Chief Financial Officer, Chris Liddell.

AmeriCredit President and Chief Executive Officer Daniel Berce said, "We're excited about joining the GM team. While we will be expanding our product set to more fully support GM, we'll continue to offer our loan products to the more than 11,000 dealers across the country we serve today. Long term, this transaction will deliver benefits to our dealers, customers and employees."

The highly regarded AmeriCredit management team will remain intact, which will assist in minimizing integration risk and maximizing opportunities between the two companies.

With total assets of approximately $10 billion, the acquisition of AmeriCredit poses minimal impact to GM's balance sheet, and does not change GM's objective of achieving strong investment grade status. Under GM ownership, AmeriCredit will maintain its own direct access to the capital markets for its financing requirements.

Under the terms of the agreement, which has been approved by both companies' boards of directors, at closing, AmeriCredit shareholders will receive $24.50 in cash for each share of stock held as of the transaction closing date.

The transaction is expected to close by the end of the fourth quarter of 2010, pending certain closing conditions, including the approval of AmeriCredit shareholders.

GM and AmeriCredit will hold a joint conference call today for analysts and media at 10:00 a.m. Eastern Daylight Time. The toll-free number for U.S. callers is 800-764-4852. The dial-in number for international callers is 1-212-231-2917. When prompted, please ask to be connected to the General Motors conference call. Details on the call and information about how to access a replay of the call can be found on the GM or AmeriCredit websites at www.gm.com/corporate/investor_information/cal_events or www.americredit.com/investors/presentations.asp, respectively.

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    • 1 Second Ago
      • 5 Years Ago
      its about time, they needed a in house financing arm...adding profits to the sales of cars..the spread could average about 5K gains in each car sold...They make money on the sale of the car and the loan it's a logical move...
      • 5 Years Ago
      I wish I could declare bankruptcy and then buy a business the following year. The business world is a F'd up place indeed.
      • 5 Years Ago

        • 5 Years Ago
        Caps and re-arranging it didn't make it any more witty than the first time.
      • 5 Years Ago
      Only in an Obama-era america could a company dump 169 billion in liabilities, steal 80 billion from U.S. tapayers, screw bondholders - who had LEGAL contracts and shareholders, then come out of bancruptcy with enough cash to buy another company for 3.5B. Not to mention NOBODY but the CEO lost his/her job - well except for the thousands of autoworkers and dealership employees obama said we "had to save."

      Amazing. If GM were the only car company left, I would walk.
      • 5 Years Ago

      GM had paid its loans. The money that the government put into GM was in the form of equity, and the plan is to sell stock after the IPO.

      As for the sub-prime lending, if you look at the new finance reform bill, lending will require far more proof of income, such as tax returns for several years with W-2s. The idea of simply putting down an income, or only showing one or two pay stubs is history. Lenders are supposed to make loans to people who have a reasonable chance or repaying, and the new rules are supposed to make it harder for lenders to loan money to potential deadbeats.
        • 5 Years Ago
        Having been a loan officer for 3 years and now in business lending I can honestly say that this will do nothing. Just because you have to provide more proof of income (which banks and credit unions do a damn good job getting) do not make someone make good loan decisions.
      • 5 Years Ago
      Ugh... They just DON'T get it... God, GM pisses me off!! Here I am with two of them...

      • 5 Years Ago
      So GM was going broke 2 years ago, we bail them out, they begin to pay back loans, and all of a sudden they have 3.5 BILLION to buy a finance arm????? Something does not sound right here. And no to all of you who think they have paid back the loans, they have not as of yet. Also by the way, they whacked all of my investment in their preferred stock. I lost 10K with no recourse to get any of it back. Someone is cheating the tax payer out of a lot of coin......................
      • 5 Years Ago
      Ah, so this is how GM is going to get back into Sub-prime lending...Americredit used to lend to anybody with a pulse and a job. At least they realize that until some sort of responble Sub-prime lending starts taking place, the economy will never completely recover.
        • 5 Years Ago
        @ Spin

        You keep stating, "There are no outstanding taxpayer loans. They are all marked paid in full either through being paid or through debt-for-equity swaps."

        Personally I wish you'd stop stating the situation in such a simplistic fashion, and recognize that there is still plenty of taxpayer money running through GM.

        The $50 billion dollar TARP bailout funds that GM received were split into three categories; stock, loans, and escrow. The US government purchased controlling shares of GM stock (preferred and common equity), then wrote a $6.7 billion dollar loan, and finally put $13.4 billion into an escrow account to be used a working capital.

        The $6.7 billion dollar loan was repaid using money leftover from the escrow account (after paying for the dissolution of Delphi and other out standing loans). So GM paid back the straight-up "loan" portion of their bailout with other bailout funds. This isn't some Fox News conspiracy theory either, there is a decent New York Times article that explains the mechanics involved in the GM repayment.

        In fact, at the time the US Treasury acknowledged that the funds were coming from other bailout money. From NYT: "Herbert M. Allison Jr., assistant secretary for financial stability, confirmed that the money G.M. used to repay its bailout loan had come from a taxpayer-financed escrow account held for the automaker at the Treasury." Source: http://www.nytimes.com/2010/05/02/business/02gret.html

        The issue here is that GM was being less than genuine when they stated that they repaid their loans "in full" and ahead of schedule. Most people didn't realize that the "loan" was only a small portion of the funds given to GM, and that they used taxpayer money to repay the $6.7 billion loan.

        Taxpayers still own $2.1 billion in preferred stock of G.M. and almost 61 percent of its common equity. GM also applied for a $10 billion low-interest (5%) loan to retool its plants, so they could meet the new CAFE standards. Personally I don't disagree with the retooling, but again, it requires further public funding.

        My point with all of this is that the way GM and Whitacre sold the GM "loan repayment" back in April 2010 snowballed a lot of people into thinking that the company was on the up and up, so much so that they were able to repay "all of their bailout money" 5 years ahead of schedule. This simply wasn't true, but for most, the notion that GM "repaid in full" has stuck. Given the micro-attention span of the 24 hour news cycle, most news agencies have long since forgotten this story (until they do their 1, 5, and 10 year bailout anniversary articles).

        So Spin... yes GM did repay the loan portion of the bailout, but the company still has many billions of publicly-funded dollars running through its veins and arteries. Most likely, there will be several billion that US taxpayers will never see recouped, and that's the reality of the situation.
        • 5 Years Ago
        The whole point of the loans was to save a large portion of the automotive INDUSTRY. As much as I don't agree with UAW workers being overpaid and overcompensated benefits wise, to have GM and Chyrsler fail would have meant close to, if not over a MILLION jobs lost. That would have been a HUGE hit not only to the economy but also unemployment benefits. What the government did was pick the lesser of two evils; bail them out with billions of dollars or let them fail and watch the industry crumble and take jobs with it.
        • 5 Years Ago
        Yeah, this is what they need to spend American tax payer money on.

        • 5 Years Ago
        Gruv, they are paying back, slowly.
        • 5 Years Ago
        Gruv, it's a neck and neck tie with you and Sea Urchin for the no. 1 dumbest poster on autoblog.
        • 5 Years Ago
        I cant believe most of you think that we only gave GM loans. We gave them a heck of a lot more money then just those loans that were paid back. We are hoping to get back in Black with the IPO but that is doubtful. GM will probably never pay off everything the Government gave them. It is nice how GM has painted this perfect picture of their company with the American money. They never talk about the other funds that were given to them. Loans were only half the money.
        • 5 Years Ago
        GM will always be America's best FAILURE.
        • 5 Years Ago
        There are no outstanding taxpayer loans. They are all marked paid in full either through being paid or through debt-for-equity swaps.
      • 5 Years Ago
      Yeah, this is what they need to spend American tax payer money on.

      • 5 Years Ago
      • 5 Years Ago

      This is a good deal for GM. They can sell more cars and the goverment witll bail them out if their sub-prime loans become a financial burden!
        • 5 Years Ago
        Plus they can probably sell their 49% stake in GMAC/Ally or whatever they currently own.
        • 5 Years Ago
        There will be no more taxpayer-funded bailouts. Period.
      • 5 Years Ago
      Isn't subprime lending what got us here in the first place?...

      Why doesn't GM just offer cheaper cars with less amenities. In Mexico you can buy a Chevrolet with no electric windows, so I know these cars exist. The thing starts at $7800 usd, too!

      If you can't afford a big car loaded with tech, then sucks to be you. Buy something cheaper and more reasonable. America really needs to get rid of this mindset that if you can't afford something you should just borrow money. How about spending less instead?

      Kind of sad to see one of the most important American corporations pushing for more spending instead of smarter spending...
        • 5 Years Ago
        GM offering financing has nothing to do with people spending more money than they can afford.

        People can drive used cars as well. Heck I would rater buy a used car than a cheapo car.

        I agree with your larger point but disagree with what you consider the cause. I think people need to be more responsible for their own finances.
        • 5 Years Ago
        Well sub prime loan on a house is a little different than a sub prime loan on a car. Let's say you are short a few K, at least you can ask a family member or a friend for help. Or company can work something out, like extending the loan by a year for smaller payments. You can not really expect anybody to lend you 15K-20K to keep your house.

        If GM can do sub prime right, they can make money.
        • 5 Years Ago
        This a myth created by the media. How quickly people are forgetting what they saw with their own eyes. Sub prime borrowers were doing just fine making their payments. The problem was that they were given loans with ridiculously low interest rates and then the banks decided to hit them with massive interest rates (GREED). It was a classic bait and switch. The whole idea was they would conn people into loans and make huge profits. Instead of choosing to accept a reasonable interest rate and continued payments from their customers they forced them into default and foreclosure. Once they had ruined enough people's lives to flood the real estate market with foreclosed homes the prices of houses crashed. Instead of taking their medicine for the crash THEY created they got the government to bail them out.

        On top of all of this nobody actually knew who was holding the mortgages for these bad loans anymore. The banks had sold off the risk under a bunch of finanical hogwash called derivatives. Everyone from pension plans to private investors were scammed into buying this hogwash not realizing that the underlying mortgages were ticking time bombs of the banks creation. So of course everyone watched their investments tank at the same time that their house was devalued and the bank was sending out a letter to let them know the interest rate on their line of credit just doubled.

        People have common sense for the most part. They don't jump into loan payments they can't afford. Sub prime loans tend to be quite profitable as long as borrowers are properly screened and they are given realistic payments that aren't going to triple down the road.
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