* U.S. Treasury to sell 95 mln shares of Ally in IPO
* Successful IPO will see govt turn profit on Ally bailout
* Ally expects IPO to be priced at $25-$28/share
* Market value to be about $13.5 bln at top of price range
(Adds details, analyst comments)
By Tanya Agrawal
March 27 Bailed-out auto lender Ally Financial
Inc said the U.S. government would sell the bulk of its stake in
the company in an initial public offering that could raise up to
A successful IPO will mean the U.S. Treasury has turned a
profit on the bailout, while still owning at least 14.1 percent
of the company.
The Treasury is selling 95 million shares at between $25 and
$28 per share, Ally said in a regulatory filing with the
Securities and Exchange Commission on Thursday. (link.reuters.com/qyd97v)
The auto lender was bailed out for $17.2 billion during the
2008 financial crisis. Ahead of the IPO, taxpayers have
recovered $15.3 billion.
The Treasury currently owns 36.8 percent of Ally, which will
have a market value of about $13.5 billion at the top of the
expected IPO price range.
The U.S. government's stake will fall to 14.1 percent if
underwriters exercise an option to sell additional shares on
behalf of the government.
The government injected funds into Ally after the bank's
Residential Capital mortgage unit suffered deep losses from home
loans that went bad.
Reuters reported in February that Ally was hoping for an IPO
of as much as $4.5 billion.
Ally initially filed for an IPO in March 2011, but the
company delayed its plans several times due to market conditions
and as it faced potential fines over its mortgage lending.
The pricing of the IPO is scheduled for April 9, two
underwriters to the offering told Reuters.
"The IPO is expected to generate a reasonably good reception
as investors are following a theme where they like companies
that are not too big, whose business is mainly U.S. based and
are insulated from the global economy," said Jack Ablin, chief
investment officer at BMO Private Bank.
Activist investor Daniel Loeb's hedge fund Third Point LLC
and Cerberus Capital Management are not selling any of their
shares in Ally in the IPO.
Third Point has a 9.5 percent stake in Ally, while Cerberus
Capital owns an 8.6 percent stake.
Ally was among the auto, housing and finance companies
bailed out in 2009 under the $423 billion Troubled Asset Relief
Program (TARP). Taxpayers have recovered $418 billion from TARP
as of Wednesday.
After its bailout, the company sold most of its
international operations, exited home loans and cut its cost of
funds by raising deposits and redeeming expensive legacy debt.
Investor interest in consumer finance companies is growing
because they stand to benefit as banks pull back from riskier
auto, personal and student loans.
Spanish bank Santander SA's auto finance unit,
Santander Consumer USA Holding Inc, went public in
January, while Fortress Investment Group's Springleaf
Holdings Inc listed last October.
Shares of Santander Consumer rose 10 percent in their debut
and Springleaf's stock gained 13 percent.
General Electric Co's credit card unit filed for an
IPO earlier this month.
Citigroup Inc's consumer finance business, OneMain
Financial, has also attracted interest from private equity
Ablin said credit quality could be a problem for Ally.
" ... This might affect their ability to raise capital at
the valuation that they would like," he said.
Ally also faces increased competition in its main auto
finance business, since it is no longer the preferred lender for
General Motors Co and Fiat Chrysler.
Ally's fourth-quarter profit was hurt by a charge to settle
allegations by regulators that it discriminated against
minorities in auto lending.
The company's auto finance business also slowed in the
quarter, with new loans falling 8 percent to $8.2 billion as its
agreement as Chrysler's preferred lender expired.
Ally reported earnings of $361 million and revenue of $4.26
billion for the year ended Dec. 30.
Citigroup, Goldman Sachs & Co, Morgan Stanley and Barclays
are lead underwriters for the offering.
Ally will list on the New York Stock Exchange under the
(Additional reporting by Aman Shah in Bangalore; Editing by
Savio D'Souza and Kirti Pandey)