TD Bank Group to acquire Chrysler Financial

December 21, 2010
  • TD to gain North American organic growth platform
  • Transaction gives TD access to top talent, systems and technology
  • Transaction allows TD to expand in large market with significant
    potential upside

Note: All figures in US$ unless otherwise noted.

TORONTO, Dec. 21 /PRNewswire-FirstCall/ – TD Bank Group (TD) (TSX and NYSE: TD), and
Cerberus Capital Management, L.P. (Cerberus), today announced an
agreement under which Chrysler Financial will be sold to TD for cash
consideration of approximately $6.3 billion. The purchase is comprised
of net assets of $5.9 billion and approximately $400 million in
goodwill. TD does not intend to issue common equity in connection with
this transaction.

Under the terms of the agreement, TD Bank, America’s Most Convenient
Bank(R), a wholly-owned subsidiary of TD, will acquire Chrysler Financial
in the U.S. and TD will acquire Chrysler Financial in Canada. The
acquisition will give TD all of Chrysler Financial’s processes and
technology as well as its existing portfolio of retail assets on both
sides of the border. Following this transaction, the business -
combined with TD’s current platforms in Canada and the United States -
will be positioned as a top 5 bank-owned auto lender in North America.

“This transaction represents a unique opportunity to purchase a great
organic growth platform at an attractive price,” said Ed Clark, Group
President and CEO, TD. “Chrysler Financial is a well-run business with
the capacity for significantly higher returns over the next several
years. This acquisition will allow us to leverage our lending expertise
and financial strength to expand our presence in a large North American
market with tremendous potential upside.”

Clark continued: “Because we’re well-capitalized and a leading deposit
franchise, we’ve been looking for opportunities to accelerate the
growth of our loan book. This acquisition gives us that opportunity and
also diversifies our lending portfolio.”

The acquisition will give TD a platform for asset generation in the
North American automotive lending market, enabling it to significantly
grow its consumer loan portfolio. In addition to the existing dealer
relationships that TD has in Canada and the U.S., Chrysler Financial’s
dealer clients serve approximately 1 million customers. TD expects that
the business could generate a return on invested capital of
approximately 20% in three to four years, once it is operating at a
steady run rate for target originations. 

With about 1,850 employees in Canada and in the United States, Chrysler
Financial has more than 45 years of operating experience in the
consumer and commercial auto financing market. It is one of the largest
auto financing firms in North America, with a strong service culture.
In the U.S., the automotive finance industry is the second largest
non-mortgage consumer asset class after credit cards. It comprises
about $650-700 billion in outstanding receivables and $350-400 billion
in annual originations on a normalized basis. Chrysler Financial plans
to focus on the prime market.

“Joining forces with TD will benefit both our customers and our dealer
network,” said Tom Gilman, CEO, Chrysler Financial. “Under Cerberus’s
ownership, Chrysler Financial has preserved its technology platform,
retained top talent and maintained key capabilities. This transaction
positions us for future growth with the financial strength of TD, one
of the soundest, best capitalized and best managed banks in the world.”

The acquisition is expected to close in the second quarter of TD’s
fiscal 2011, pending regulatory approvals and satisfaction of other
customary closing conditions. Following the completion of the
transaction, Chrysler Financial will continue to operate as a North
American business overseen by Tom Gilman and headquartered in Toronto.
TD expects to rebrand Chrysler Financial under the TD brand by spring

“This transaction with TD is the right next step for the future of these
businesses, their employees and customers,” said Mark Neporent, Senior
Managing Director and Chief Operating Officer, Cerberus.  “It ensures
that the acquired businesses will be part of a strong and
well-capitalized financial institution, which will help
create sustainable jobs.”

Clark concluded: “This transaction takes our auto finance business to a
new level and gives us access to a North American platform, top talent
and systems and technology capable of processing over 2 million credit
applications per year. The Chrysler Financial management team and sales
force have a proven track record and extensive industry experience and
will complement our existing lending expertise.”

The transaction is expected to have Tier 1 capital impact on closing of
approximately 55-60 basis points on a pro forma basis as at TD’s last
year-end. The transaction is expected to be neutral to earnings in 2011
on an adjusted basis and will add approximately $100 million in
adjusted earnings in 2012, the first full year of operations.

Investor information and call:
The call will be audio webcast live at www.td.com/investor/ at 8:30 a.m. ET and is expected to last about 45 minutes. The call and
webcast will feature presentations by TD executives on the transaction
and will be followed by a question-and-answer period.  The presentation
material referenced during the call will be available on the website at
www.td.com/investor/calendar_arch.jsp . A listen-only telephone line will be available at 416-644-3414 or
1-877-974-0445 (toll free).

About TD Bank Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as
TD Bank Group (TD or the Bank). TD is the sixth largest bank in North
by branches and serves approximately 19 million customers in
four key businesses operating in a number of locations in key financial
centres around the globe: Canadian Personal and Commercial Banking,
including TD Canada Trust and TD Insurance; Wealth Management,
including TD Waterhouse and an investment in TD Ameritrade; U.S.
Personal and Commercial Banking, including TD Bank, America’s Most
Convenient Bank; and Wholesale Banking, including TD Securities. TD
also ranks among the world’s leading online financial services firms,
with more than 6 million online customers. TD had C$620 billion in
assets on October 31, 2010. The Toronto-Dominion Bank trades under the
symbol “TD” on the Toronto and New York Stock Exchanges.

About TD Bank, America’s Most Convenient Bank(R)
TD Bank, America’s Most Convenient Bank, is one of the 10 largest banks
in the United States, providing customers with a full range of
financial products and services at more than 1,250 convenient locations
from Maine to Florida. On September 30, 2010, The South Financial
Group, Inc. was acquired by TD Bank Group, and its subsidiary Carolina
First Bank
merged with TD Bank. Carolina First Bank will continue to
operate under the trade names Carolina First Bank in North and South
and Mercantile Bank in Florida until conversion and rebranding
in 2011. TD Bank is headquartered in Cherry Hill, N.J., and Portland,
. Carolina First Bank and Mercantile Bank are trade names of TD
Bank, N.A. For more information, visit www.tdbank.com. TD Bank, America’s Most Convenient Bank, is a member of TD Bank Group
and a subsidiary of The Toronto-Dominion Bank of Toronto, Canada, a top
10 financial services company in North America. The Toronto-Dominion
Bank trades on the New York and Toronto stock exchanges under the
ticker symbol “TD.” To learn more, visit www.td.com.

About Chrysler Financial
Founded as Chrysler Credit Corporation more than four decades ago,
Chrysler Financial has built a long, proud record of excellence based
upon a complete line of world-class automotive financial products and
services for dealers and consumers. Today, Chrysler Financial is an
independent financial services company doing business in the United
and Canada, offering retail financing programs in the United
through franchised automotive dealerships of all brands.

About Cerberus Capital Management
Established in 1992, Cerberus Capital Management, L.P., along with its
affiliates, is one of the world’s leading private investment firms with
approximately $23 billion under management. Through its team of
investment and operations professionals, Cerberus specializes in
providing both financial resources and operational expertise to help
transform undervalued companies into industry leaders for long-term
success and value creation. Cerberus holds controlling or significant
minority interests in companies around the world. Cerberus is
headquartered in New York City with affiliate and/or advisory offices
in the United States, Europe, the Middle East and Asia.

Caution Regarding Forward Looking Information and Other Matters

From time to time, TD makes written and oral forward-looking statements,
including in this press release, in other filings with Canadian
regulators or the U.S. Securities and Exchange Commission (SEC), and in
other communications. In addition, representatives of TD may make
forward-looking statements orally to analysts, investors, the media and
others. All such statements are made pursuant to the “safe harbour”
provisions of applicable Canadian and U.S. securities laws, including
the U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, among others, statements regarding
TD’s objectives and priorities and strategies to achieve them, and TD’s
anticipated financial performance. Forward-looking statements are
typically identified by words such as “will”, “would”, “expect”,
should”, “believe”, “anticipate”, “intend”, “estimate”, “plan”, “may”
and “could”.

By their very nature, these statements require TD to make assumptions
and are subject to inherent risks and uncertainties, general and
specific.  Especially in light of the uncertainty related to the
financial, economic and regulatory environments, such risks and
uncertainties–many of which are beyond TD’s control and the effects of
which can be difficult to predict–may cause actual results to differ
materially from the expectations expressed in the forward-looking
statements.  Risk factors that could cause such differences include:
credit, market (including equity, commodity, foreign exchange and
interest rate), liquidity, operational, reputational, insurance,
strategic, regulatory, legal, and other risks, all of which are
discussed in the Management’s Discussion and Analysis (2010 MD&A) in
TD’s 2010 Annual Report.

With regard to TD’s proposed acquisition of Chrysler Financial, there
can be no assurance that TD will realize the anticipated benefits due
to a variety of factors, including: inability to complete the
acquisition in the timeframe anticipated, obtain governmental approvals
of the transaction or satisfy other conditions to the transaction on
the proposed terms and timeframe; challenges from operating Chrysler
Financial in a more complex regulatory environment after closing; delay
in increasing the rate of loan and lease originations by Chrysler
Financial; renewed competition from captive auto finance lenders;
weaker than expected rebound in the auto lending market; and challenges
with introducing new products and services, achieving market acceptance
of TD’s auto lending products and services in new markets, and
developing and maintaining loyal dealer and customer relationships.

Additional risk factors include the impact of recent U.S. legislative
developments, as discussed under “Significant Events in 2010″ in the
“How we Performed” section of the 2010 MD&A, changes to and new
interpretations of capital and liquidity guidelines and reporting
instructions, increased funding costs for credit due to market
illiquidity and competition for funding, and the failure of third
parties to comply with their obligations to TD or its affiliates
relating to the care and control of information.

We caution that the preceding list is not exhaustive of all possible
risk factors and other factors could also adversely affect TD’s
results.  For additional information, please see the “Risk Factors and
Management” section of the 2010 MD&A. TD’s material general economic
assumptions are set out in TD’s 2010 Annual Report under the heading
“Economic Summary and Outlook” and for each of the business segments
under the heading “Business Outlook and Focus for 2011″.

All such factors should be considered carefully, as well as other
uncertainties and potential events, and the inherent uncertainty of
forward-looking statements, when making decisions with respect to TD
and undue reliance should not be placed on TD’s forward-looking

Any forward-looking statements contained in this press release represent
the views of management only as of today’s date and are presented for
the purpose of assisting TD’s shareholders and analysts in
understanding TD’s objectives and priorities, and may not be
appropriate for other purposes.  Actual results may differ materially
from the results anticipated in these forward-looking statements.  TD
does not undertake to update any forward-looking statements, whether
written or oral, that may be made from time to time by or on its
behalf, except as required under applicable securities laws.

TD’s financial results prepared in accordance with GAAP are referred to
as “reported” results. TD also utilizes non-GAAP financial measures
referred to as “adjusted” results (i.e., reported results excluding
“items of note”, net of income taxes) to assess each of its businesses
and measure overall bank performance. The items of note relate to items
which management does not believe are indicative of underlying business
performance and include integration and restructuring charges relating
to U.S. Personal and Commercial Banking acquisitions. Adjusted net
income and adjusted earnings are not defined terms under GAAP and may
not be comparable to similar terms used by other issuers. See “How the
Bank Reports” in TD’s 2010 MD&A for further explanation.

SOURCE TD Bank Group

Source: newswire

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