Ally Bank Gobbles Up Sub-Prime Specialist

Ally CEO Jeffrey Brown

Ally Financial has entered into a definitive agreement to acquire CardWorks in a transaction valued at approximately $2.65 billion. Cardworks is a privately held company with $4.7 billion in assets and $2.9 billion in deposits1. Under the terms of the agreement, Merrick Bank, a wholly owned subsidiary of CardWorks, Inc., will merge into Ally Bank.

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. 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.  

CardWorks is a privately held company headquartered in Woodbury, NY with facilities in Florida, Utah and Pennsylvania. CardWorks is a top-202 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. Additionally, CardWorks provides recreational and marine consumer finance products and is a top-152 merchant acquirer in the United States.

“CardWorks represents an industry-leading credit card platform in the U.S., and this acquisition serves as an important milestone in Ally’s evolution to be a full-service financial provider for our customers,” said Ally Chief Executive Officer Jeffrey J. Brown. “I have tremendous admiration for the three decades of leadership Don Berman has provided as founder and CEO and remain impressed with what the entire team has accomplished in building a resilient, growing business with a commitment to the customer. 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.”

Consideration3 for the transaction will include approximately $1.35 billion of cash and $1.30 billion in Ally common stock, or 39.5 million shares4. The merger consideration remains subject to closing equity and other adjustments and fill-or-kill rights.

Don M. Berman, Chairman, Chief Executive Officer and Founder of CardWorks, owns 70% of CardWorks and will receive a combination of cash and Ally common stock as his consideration. Shares of Ally common stock granted to Mr. 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 Mr. Berman can sell or transfer up to one-third of his shares. On each subsequent anniversary, Mr. Berman will be permitted to sell or transfer up to another one-third of his shares. As a result, three years after close of the transaction, Mr. Berman may sell or transfer any remaining shares of Ally common stock.  Mr. Berman will join Ally’s Board of Directors and become a member of Ally’s executive management team following closing.

“I’m incredibly excited for this next chapter of CardWorks,” said Berman. “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. Importantly, Ally’s inclusive and purpose-driven culture represents an important shared value between the two companies. I’m energized by the opportunity the combination of these two great businesses will provide to our customers and employees.”

Strategic and Financial Benefits of the Proposed Acquisition:

  1. Alignment with Ally’s long-term strategic objectives: The acquisition of CardWorks directly aligns with Ally’s customer-centric strategy of offering differentiated consumer product offerings supported by a growing and low-cost deposit base.
  2. Complements Ally’s existing product offerings, adding a core banking product: CardWorks is a proven credit card lender with complementary full-spectrum servicing and merchant services. The credit card market has been growing at a 5% compound annual growth rate since 20135 and presents a sizeable market opportunity for the combined company.
  3. Strong cultural fit with customer-first approach driven by experienced management team: CardWorks’ cycle-tested leadership team has built the company into a mature customer-centric business through best-in-class underwriting, pricing and risk management capabilities across its 32 years in operation.
  4. Enhances Ally’s financial profile, introducing additional growth opportunity: Immediate enhancement of Ally’s revenues and earnings stream through strong portfolio risk-adjusted returns and diversified fee and interchange revenue. Pro forma for the transaction, CardWorks would have increased Ally’s 2019 full-year results across many metrics, including 17% higher adjusted total net revenue6 and 18% higher core pre-tax income6.
  5. The acquisition of CardWorks meaningfully benefits Ally’s long-term financial trajectory.
    ·  Relative to Ally’s financial trajectory, the transaction is expected to improve Ally’s Core ROTCEby approximately 100 – 150 basis points (“bps”) for 2021 and 2022 and provide up to 100 bps of Adjusted EPS6 accretion over the same time period.
  6. Ally’s enterprise capital targets expected to remain consistent: Ally’s common equity tier 1 (“CET1”) capital ratio will remain largely unchanged pro forma for the acquisition, and Ally expects to maintain a 9.0% CET1 target. Additionally, Ally intends to execute up to $1.0 billion of its previously announced $1.25 billion share repurchase program7.

“This acquisition directly aligns with our strategic priorities to relentlessly focus on providing our customers with a differentiated banking experience, while affording opportunities to scale our product offerings and accelerate the progress of our earnings growth,” said Brown. “The long-term financial and strategic benefits of the transaction materially enhance our ability to expand risk-adjusted returns and drive value for our shareholders over time.”

Timing and Approvals
The acquisition, which is subject to customary regulatory approvals and closing conditions, is expected to close in the third quarter of 2020. Each company’s board of directors has unanimously approved the acquisition.

Goldman Sachs & Co. LLC served as financial advisor and Sullivan & Cromwell served as legal counsel to Ally in this transaction. Wachtell, Lipton, Rosen & Katz served as legal counsel to CardWorks in this transaction.

About Ally Financial Inc.
Ally Financial Inc. (NYSE: ALLY) is a leading digital financial-services company with $180.6 billion in assets as of December 31, 2019. As a customer-centric company with passionate customer service and innovative financial solutions, we are relentlessly focused on “Doing It Right” and being a trusted financial-services provider to our consumer, commercial, and corporate customers. We are one of the largest full-service automotive-finance operations in the country and offer a wide range of financial services and insurance products to automotive dealerships and consumers. Our award-winning online bank (Ally Bank, Member FDIC and Equal Housing Lender) offers mortgage-lending services and a variety of deposit and other banking products, including savings, money-market, and checking accounts, certificates of deposit (CDs), and individual retirement accounts (IRAs). Additionally, we offer securities-brokerage and investment-advisory services through Ally Invest. Our robust corporate finance business offers capital for equity sponsors and middle-market companies.

For more information and disclosures about Ally, visit

About CardWorks Inc.
Founded in 1987, CardWorks is a consumer finance lender and servicer, and a people-centric, compliance-focused organization enabled by data and technology. CardWorks is a leading servicer of nationally-branded MasterCard/Visa cards, private label cards, secured cards, and other unique products, as well as secured and unsecured installment loans.

Merrick Bank, founded in 1997 as a wholly owned subsidiary of CardWorks, is an FDIC insured top-20 U.S. issuer of Visa® branded credit cards. Merrick Bank also provides finance options to consumers through marine and recreational vehicle dealers throughout the country. While Merrick Bank specializes in non-prime consumer lending, it is also a top-15 U.S. credit card merchant acquirer, clearing approximately $32 billion in transaction volume per year for 85,000 merchants and 42 independent sales organizations. 

For more information, visit and  

CardWorks, Inc. Consolidated Statements of Financial Condition (Unaudited Financials) as of 12-31-2019
The Nilson Report, rankings apply for years 2013-2018 for Credit Card Issuer and Top-15 for 2018 for Merchant Acquirer.
Price reflects Ally’s forecast of closing equity and other adjustments, excluding any possible fill-or-kill adjustment. This possible adjustment may arise if Ally’s stock price declines by more than 15%, a “fill or kill” termination right is exercised, and Ally elects to “fill” by issuing additional stock. Adjustments to $2.6 billion purchase price are described in the definitive documents for the transaction. CardWorks book value of equity was $1.48 billion as of December 31, 2019, according to the CardWorks, Inc. Consolidated Statements of Financial Condition (Unaudited Financials) for full-year 2019 or period-end 12-31-2019.
4Shares based on Ally’s closing share price on February 14, 2020 of $32.85.
Source: Federal Reserve Bank of New York. Reflects compound annual growth rate of credit card balances from 2013 – 2019
Represents a non-GAAP financial measure. See Definitions of Non-GAAP Financial Measures for details.
Ally Board of Directors authorized up to $1.25 billion in common share repurchases for 3Q 2019 – 2Q 2020. Actions in connection with the repurchase program will be subject to various factors, including Ally’s capital and liquidity positions, regulatory and accounting considerations (including Accounting Standards Update 2016 13, Financial Instruments Credit Losses, commonly known as CECL), Ally’s financial and operational performance, alternative uses of capital, the trading price of Ally’s common stock, and market conditions. The repurchase program does not obligate Ally to acquire a specific dollar amount or number of shares and may be extended, modified, or discontinued at any time.

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