Ally Financial Inc. (NYSE: ALLY) announced on Wednesday it has entered into a definitive agreement to acquire CardWorks, a U.S. credit card issuer focused on the non-prime segment with a complementary full-spectrum unsecured servicing operation that includes third-party servicing and recovery capabilities, in a transaction valued at approximately $2.65 billion.
According to Ally, the acquisition of CardWorks will further diversify Ally’s product offerings, adding an established credit card platform, full-spectrum servicing and recovery operation and a nationwide merchant acquiring business. Ally further explained:
“These additional capabilities immediately enhance Ally’s award-winning direct bank deposit and consumer product platform and complement the company’s market-leading auto finance, insurance, and commercial product lines. Upon completion of the transaction, Ally will provide over 11 million customers in all 50 states with compelling secured and unsecured banking products.”
Speaking about the acquisition, Ally CEO, Jeffrey J. Brown, stated that CardWorks represents an “industry-leading credit card platform in the U.S.” and the acquisition will serve as an important milestone in Ally’s development to be a full-service financial provider.
“Beyond the compelling strategic rationale and financial enhancements this transaction brings, CardWorks is an ideal cultural fit for Ally. Both companies share a deep-rooted history of disciplined risk management and an obsession over the customer. I’m thrilled to welcome CardWorks to the Ally team and look forward to adding value for all of our stakeholders.”
Ally also revealed that Don M. Berman, Chairman, CEO, and Founder of CardWorks, now owns 70% of CardWorks and will receive a combination of cash and Ally common stock as his consideration. The shares of Ally common stock granted to Berman will be subject to a lock-up agreement restricting the sale or transfer of 100% of his shares until the one-year anniversary of the closing date, at which point Berman can sell or transfer up to one-third of his shares. Berman added:
“Ally has built an industry-leading online banking franchise while simultaneously re-affirming the market leading positions of its auto finance and insurance businesses. At CardWorks, we’ve successfully built a people-centric, compliance-focused organization enabled by technology with a mission to delight our clients and customers, and Ally represents an ideal partner. In leveraging Ally’s commitment to innovation and adaptiveness, the combined company will be well positioned to meet the financial needs of our ever-growing customer base and deliver sustainable growth and performance.”