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Ally Financial to Offer Its Dealers 5 Percent of IPO Shares

June 4, 2011
3 min to read


Ally Financial Inc. said it intends to offer as much as 5 percent of the common shares from its initial public offering to its dealers, as the auto lender disclosed more details of its IPO.


The move allows auto dealers, Ally's primary customers, access to the auto lender's public stock offering, which is expected this summer. Ally's core business is to provide financing to dealers, helping them put new vehicles on their lots, reported The Wall Street Journal.

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Any shares left over from this 5 percent reserve will be offered to the general public, Ally said in its amended IPO prospectus filing on Friday with the U.S. Securities and Exchange Commission.


Gina Proia, an Ally spokeswoman, declined to comment on the potential size or timing of the stock offering. But people close to the deal said earlier this year that the plan is for the U.S. Treasury to sell about $5 billion of common stock in the offering. If markets cooperate, Ally's shares should begin trading before the end of June, a person close to the deal said in May.


Ally has listed Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley as its lead underwriters, but other banks are expected to be added to the roster.


Ally said last month it intends to list shares in its public offering on the New York Stock Exchange under the symbol ALLY.


At the time of the IPO, the U.S. Treasury Department, which owns 74 percent of Ally, plans to convert $2.9 billion of its existing holding of $5.9 billion of mandatory convertible preferred securities into common stock, Ally said in May in an earlier amended IPO prospectus filing with the SEC.

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The Treasury will exchange the remaining $3 billion of its mandatory convertible preferred securities into so-called tangible equity units, a security with a debt and equity component. The Treasury will offer a portion of these tangible equity units alongside the common equity offering.


In late March, Ally, majority-owned by the U.S. government, filed an initial prospectus to begin a months-long process that will culminate with the Treasury further unwinding its $17.2 billion bailout of the company. To date, the Treasury has recouped $2.7 billion of its investment by selling trust preferred securities that it held in Ally.


As with almost any IPO, only a fraction of Ally's shares will be sold. The U.S. government likely will have to sell its holdings over the course of months or years to be fully repaid.


The Treasury bailed out Ally as part of efforts to rescue General Motors Co. and Chrysler Group LLC at the height of the financial crisis. Ally, once owned by GM and subsequently majority-owned by private investors before the federal rescue, provides financing for dealerships and customers of the auto makers.


For the first quarter, Ally reported a 9.9 percent decline in net income as profit in its North American auto-finance and mortgage operations fell.

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Ally reported a $146 million profit for the quarter ended March 31, its fifth consecutive quarterly profit following steep losses in the financial crisis. The company said core pretax income, which reflects continuing operations before taxes and some expenses, was $428 million, compared with $584 million a year earlier.

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