U.S. Plans to Sell $3 Billion of Ally, Cutting Stake to 37%

Jan 16, 2014 5:11 pm ET

(Updates with comment on anonymous buyers starting in the fifth paragraph.)

Jan. 16 (Bloomberg) -- The U.S. Treasury Department pushed closer to exiting its bailout of Ally Financial Inc., the auto lender and online bank, by disclosing plans to raise about $3 billion from selling common stock to private investors.

The sale cuts taxpayers’ stake in Ally to 37 percent, the Treasury said today in a statement. Ally said separately that the deal has been completed. The U.S. holding was reduced to 64 percent in November from 74 percent in a prior transaction.

The agency didn’t name buyers for the 410,000 shares of Detroit-based Ally at $7,375 apiece and wouldn’t elaborate. The deal leaves the government with about 572,000 shares, and the U.S. will explore ways to reduce its investment that could include a public offering or another private sale, according to the statement.

“The strong investor interest is a testament to the significant transformation of the company,” Ally Chief Executive Officer Michael A. Carpenter said in a company statement.

While buyers have been kept confidential in some asset sales by the U.S., naming them is important for transparency, said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.

Who’s Buying?

“You want to know, did the government sell too cheaply, is taxpayer money being used wisely?” Elson said in an interview. “In this case, disclosure might be warranted.”

Citigroup Inc. and Bank of America Corp. are placement agents on the offering, the Treasury said. Lazard Ltd. is the Treasury’s financial adviser on the management and disposition of the investment in Ally.

Ally, known as GMAC when it was the finance arm of the automaker that’s now called General Motors Co., won Federal Reserve approval to become a bank holding company in December 2008. The change enabled it to tap a U.S. rescue that swelled to $17.2 billion.

After the sale, the U.S. will have recouped about $15.3 billion, or 89 percent, of the bailout Ally received as part of the Treasury’s Troubled Asset Relief Program, according to the statement. The U.S. will have recovered about $435.8 billion on all of its TARP investments, more than the $422.2 billion disbursed under the program, Treasury said.

Burdened by shoddy subprime mortgages, Ally had begun reporting losses in 2007 that reached $10.3 billion in 2009. With the firm on the brink of failure, the U.S. engineered a rescue to ensure money kept flowing to the auto industry and preserve jobs. Carpenter, 66, has wound down mortgage operations and sold other assets.

Ally won Fed approval last month to convert to financial holding company status as it seeks to retain an insurance unit and SmartAuction website for dealers.

--Editors: Rick Green, David Scheer