(GM - AmeriCredit poll story updated with analyst commentary)
NEW YORK (TheStreet) -- In an all-cash transaction valued at about $3.5 billion, GM has agreed to acquire subprime lender AmeriCredit (ACF) .
This would involve a payment of $24.50 in cash per share, or a 24% premium to AmeriCredit's $19.70 closing price the previous day.
GM said it enters the deal in order to meet customer demand for leasing and non-prime financing for GM vehicles.
"This acquisition supports our efforts to design, build and sell the world's best vehicles by expanding the financing options we can offer to consumers who want to buy GM vehicles," GM Chief Executive Officer, Ed Whitacre said in a press release. "Adding AmeriCredit to our team will improve our competitiveness in auto financing offerings, and I am very pleased to have them on board."
The automaker said that since GM and AmeriCredit launched a successful non-prime program in September 2009, GM's non-prime penetration has increased significantly. It adds that while AmeriCredit already has relationships with approximately 4,000 GM dealers, this transaction will enhance dealer receptivity and improve sales penetration rates through coordinated GM branding and targeted customer marketing initiatives.
GM said the acquisition of AmeriCredit poses minimal impact to GM's balance sheet, and does not change GM's objective of achieving strong investment grade status. Under GM ownership, AmeriCredit will maintain its own direct access to the capital markets for its financing requirements.
The transaction is expected to close by the end of the fourth quarter of 2010, pending certain closing conditions, including the approval of AmeriCredit shareholders.
Shares of AmeriCredit stock were surging 21.1% to $23.85 on the news.
In reaction to the deal,
reporter Jason Notte said in his
GM Makes a Deal: Today's Outrage
article Thursday that "GM's selective amnesia not only glossed over subprime lending's role in the world's current economic uncertainty, but put its potential domestic buyer base on the hook for another ill-conceived financing scheme."
Still, he added, "sadly, GM needs AmeriCredit more than the lender needs it. If GM ever wants to control its revenue, have an IPO and make people stop equating it with that pesky MTLQQ ticker from the desiccated corpse of its previous incarnation, shoring up the lease numbers is a step in the right direction."
In an investor note, CRT Capital analyst Kirk Ludtke said "we view the transaction as a positive for the company, primarily because a captive finance capability should reassure investors in a potential new
that the company's retail customers will have access to at least some form of financing throughout the economic or credit cycle and the new GM may be able to prudently increase volumes particularly in the luxury market where the availability of leasing is critical."
At the same time, the AmeriCredit transaction could be a "modest negative" for
(formerly known as GMAC) despite the Obama Administration's substantial economic backing of Ally and the "new" GM's reassurances that AmeriCredit won't compete with Ally in the near future.
"We believe that the AmeriCredit transaction will create additional uncertainty with respect to Ally's long term viability," Ludtke wrote. Currently, GM is Ally's biggest auto partner and had had an exclusive partnership with 56% Treasury-owned Ally.
Given all this, readers of
, what do you think of the GM deal? Should GM have agreed to buy AmeriCredit?
GM to File for IPO in August
-- Reported by Andrea Tse in New York
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