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 its 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 its investment in Chrysler Financial and return some money to investors, according to the people. Chrysler Financial, in Farmington Hills, Mich., mostly consists 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 Group 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 $20 billion expanding in the U.S. the past six years. It has purchased banks including Banknorth Group of Portland, Maine, and Commerce Bancorp in Cherry Hill, N.J. It now has 1,300 branches in 16 U.S. states from Maine to Florida — more branches than it has in Canada.
TD's chief executive, Edmund Clark, said as recently as this month that it is primarily interested in Federal Deposit Insurance Corp.-assisted transactions and "small" purchases, which he defined in February as being less than $10 billion of 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.
The Chrysler Financial purchase would be the second largest for Toronto-Dominion behind its $7.1 billion acquisition of Commerce in 2008, according to data compiled by Bloomberg News. Toronto-Dominion was formed in 1955 as a combination of two Canadian banks that trace back to the mid-1800s.
In addition to its branch network, Toronto-Dominion is the largest investor in TD Ameritrade Holding Corp., owning about 46% of the Omaha, Neb., brokerage.
"This is a different channel for them to tap the retail client," said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto, which manages about $4 billion including Toronto-Dominion shares. "Maybe they view it that they can bring their Aaa rating and fund these assets at a lower cost."
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. Bank of Nova Scotia, Canada's third-largest bank, purchased as much as $20 billion in auto loans from General Motors Co. in 2005.
Clark told reporters in Montreal Nov. 25 that Canadian banks could expand their automobile leasing business by offering loans through dealerships rather than in bank branches.
Toronto-Dominion reported last week that fiscal fourth-quarter profit dropped 1.6%, to $989 million, led by a decline in trading and underwriting fees.
