TORONTO — Toronto-Dominion Bank has agreed to buy Chrysler Financial, the automaker's old lending arm, from private equity firm Cerberus Capital Management LP for $6.3 billion.
The deal is the latest example of a healthy Canadian bank using its muscle to snap up U.S. institutions battered by the financial crisis.
Toronto-Dominion chief executive Ed Clark said Canada's second-largest bank is looking to accelerate growth in the United States and this deal makes it a top-five North American auto lender.
"We're taking advantage of a disruptive market to add on assets that in the heyday you could never buy for these kind of prices," Clark said. "We're already a top-10 player in the U.S. We're getting even bigger."
New York-based Cerberus bought Chrysler Financial in 2007 as part of the $7.4 billion deal to take over Chrysler's automaking business and lending business. Cerberus handed over control of Chrysler's automaking operations to the government, when the automaker nearly ran out of cash and faced liquidation in 2008.
The car business was a drain on Cerberus, but the financial services business could end up at least breaking even. The private-equity firm is expected to recoup its investment in Chrysler Financial, returning some money to investors unhappy with Cerberus' deal with the automaker from the start.
TD, which wants to expand its loan business, said the deal will give it access to technology that can process more than 2 million credit applications per year. The auto lending market hasn't taken as much of a hit as other kinds of consumer loans over the past several years. And the value of used cars is picking up as the economy improves.
The deal is the second U.S. acquisition in a week by a Canadian bank. On Friday, the Bank of Montreal announced it is buying Milwaukee-based bank Marshall & Ilsley Corp. for $4.1 billion in stock.
Canadian banks are investing in the United States from a position of strength, as they weathered the economic crisis far better than their counterparts in other countries.
Toronto-Dominion Bank has expanded its U.S. presence in recent years with the purchase of New Jersey-based Commerce Bancorp in what has been its largest acquisition. TD also bought smaller, troubled banks in the Carolinas and Florida such as South Carolina-based South Financial Group. Earlier this year, TD agreed to buy the risky assets of three insolvent Florida banks (AmericanFirst Bank of Clermont; First Federal Bank of North Florida of Palatka; and Riverside National Bank of Florida of Fort Pierce), worth $3.8 billion. TD didn't have a presence in the United States six years ago but now has about 1,300 branches in the United States, compared with about 1,100 in Canada.
TD also holds a 45 percent stake in online brokerage TD Ameritrade Holding Corp. of Omaha, Nev.
"We're not in any hurry to do anything more, but we'll keep our eyes out, as long as they are small. I define that as $10 billion in assets or less," Clark said. "We said when we went into the United States that we would go big or go home and then we did a series of small deals, but those small deals have now put us in the top 10 in terms of deposits."