In a significant move within the financial services industry, Synchrony (NYSE: SYF) has announced the acquisition of Ally Financial Inc.’s (NYSE: ALLY) point of sale financing business, including a substantial $2.2 billion loan receivables portfolio. This acquisition marks a notable expansion for Synchrony, integrating nearly 2,500 merchant locations and supporting over 450,000 active borrowers in sectors like home improvement services and healthcare.

Creating a Differentiated Solution

Synchrony aims to create a unique offering in the industry by providing both revolving credit and installment loans at the point-of-sale in the home improvement vertical. This expansion aligns with Synchrony’s multi-product strategy, extending its revolving credit and promotional financing products to Ally Lending’s merchants. The deal notably enhances Synchrony’s presence in high-growth areas such as roofing, HVAC, and windows.

Complementing Existing Platforms

The acquisition of Ally Lending’s health portfolio also complements Synchrony’s current Health and Wellness platform, extending its reach in areas like cosmetic, audiology, and dentistry. Synchrony President and CEO Brian Doubles commented on the strategic fit of the deal, emphasizing the operational efficiency and merchant base diversification it brings.

Ally Financial’s Perspective

Ally Financial’s CEO Jeff (JB) Brown highlighted that the agreement to sell Ally Lending aligns with their broader initiative to invest resources in growing scale businesses. He noted the transaction’s role in optimizing risk-adjusted returns in a dynamic operating environment.

Financial Implications and Closing

Ally expects the sale to modestly increase its CET1 ratio by approximately 15 basis points upon closing, with positive effects on tangible book value and earnings per share in 2024. Synchrony anticipates the acquisition to be accretive to its 2024 earnings per share, excluding initial reserve build for credit losses.

The transaction, set to close in the first quarter of 2024, is subject to customary closing conditions. Synchrony and Ally are committed to ensuring a smooth transition for merchants, customers, and employees.

The acquisition of Ally’s point of sale financing business by Synchrony represents a strategic move in the financial services industry. By integrating Ally’s loan portfolio, which includes significant merchant locations and active borrowers in key sectors like home improvement and healthcare, Synchrony is poised to create a more diversified and robust service offering. This acquisition not only enhances Synchrony’s reach in high-growth specialty areas but also complements its existing Health and Wellness platform, marking a significant step in its multi-product strategy. The deal is expected to bring about operational efficiency and economies of scale, making it a valuable addition to Synchrony’s portfolio.

  Ally Financial, Brian Doubles, Jeff Brown, Synchrony