Ally to pay $2.6B for unsecured lender CardWorks
Ally Financial in Detroit has agreed to buy CardWorks, a subprime credit card and consumer finance lender based in Woodbury, N.Y.
The $181 billion-asset Ally said in a press release Tuesday that it will pay $2.65 billion in cash and stock for the $4.6 billion-asset parent of Merrick Bank. The deal is expected to close in the third quarter.
CardWorks, founded in 1987, specializes in unsecured servicing and merchant services, though it also offers recreational and marine consumer finance loans. It has $2.9 billion in deposits and offices in Florida, Utah and Pennsylvania.
"This acquisition serves as an important milestone in Ally's evolution to be a full-service financial provider for our customers," Jeffrey Brown, Ally’s CEO, said in the release.
“Both companies share a deep-rooted history of disciplined risk management and an obsession over the customer,” Brown added. "This acquisition directly aligns with our strategic priorities to relentlessly focus on providing our customers with a differentiated banking experience, while affording opportunities to scale our product offerings and accelerate the progress of our earnings growth.”
The deal comes seven months after Ally ended a three-year-old credit card partnership with TD Bank.
Don Berman, CardWorks’ chairman and CEO, owns 70% of the company. He will be subject to a lock-up agreement barring him from selling or transferring all of his Ally stock for a year after the deal closes. He will be allowed to sell a third of his Ally stock over each of the following three years.
Berman will join Ally's board and its executive management team.
Ally said the deal should increase its return on tangible common equity by 100 to 150 basis points in 2021 and 2022. It should provide 100 basis points of accretion to Ally’s adjusted earnings per share over those years.
Goldman Sachs and Sullivan & Cromwell advised Ally. Wachtell, Lipton, Rosen & Katz advised CardWorks.