Toronto-Dominion plans Chrysler Financial bid

Toronto-Dominion Bank may reach an agreement as soon as this week to acquire Chrysler Financial Corp, the auto-loan company owned by Cerberus Capital Management LP, said three people with knowledge of the matter.

Chrysler Financial may sell for almost $6 billion to $7 billion, which is the company’s book value, or assets minus liabilities, said one of the people, who declined to be identified because the matter is private. Discussions with Toronto-Dominion could still fall apart, and other potential buyers are talking with Cerberus, the people said. An agreement could also slip into next week, one person said.

Cerberus is likely to recoup all of its investment in Chrysler Financial and return some money to investors, according to the people. Chrysler Financial, based in Farmington Hills, Michigan, is mostly comprised of old car and truck loans that are still being paid off by consumers, along with a platform and technology that a buyer could use to start an auto-lending business, said two people. ING Groep NV is also among buyers in talks with Cerberus, the Wall Street Journal reported.

 

Toronto-Dominion, Canada’s second-largest bank, has spent more than C$20 billion ($19.9 billion) expanding in the US during the past six years. The Toronto-based lender has purchased banks including Banknorth Group of Portland, Maine, and Cherry Hill, New Jersey-based Commerce Bancorp. It now has a network of 1,300 branches in US states from Maine to Florida — more branches than it has in Canada.

Purchase interest
Chief Executive Officer Edmund Clark said as recently as this month that the bank is primarily interested in buying Federal Deposit Insurance Corp-assisted transactions and “small” purchases, which he defined in February as being less than $10 billion in assets.

Wojtek Dabrowski, a Toronto-Dominion spokesman, said the bank doesn’t comment on rumor or speculation. Peter Duda, a spokesman for Cerberus, wasn’t immediately available to comment.

In addition to its retail network, Toronto-Dominion is the largest investor in TD Ameritrade Holding Corp, owning about 46 per cent of the Omaha, Nebraska-based brokerage.

Clark expressed an interest last month in entering automobile leasing in Canada, which domestic banks have been banned from doing since 1980. The Canadian government has been looking at changing regulations. Clark told reporters in Montreal November 25 that Canadian banks could expand their automobile leasing business by offering loans through dealerships rather than in bank branches.

Profit rising
Toronto-Dominion reported last week that fourth-quarter profit dropped 1.6 per cent to C$994 million, led by a decline in trading and underwriting fees. While profit from the bank’s TD Securities investment bank dropped 74 per cent, earnings more than doubled at its US consumer banking arm.

Clark has said he expects Toronto-Dominion to earn $1.6 billion a year from its US operations within three years.

Cerberus, led by founder Stephen Feinberg, wagered on the US auto industry with takeovers of General Motors Corp’s auto lender in 2006, followed by the Chrysler automaker and lender the following year.