Ally Financial Inc. agreed to sell its Mexican insurance business to Ace Ltd. for $865 million in cash as the bailed-out company narrows its focus on auto lending and U.S. banking.
The price for ABA Seguros is more than twice the unit’s $390 million book value -- what it would be worth if liquidated -- at the end of June, Ally spokeswoman Gina Proia said in an e-mail. The purchase of Mexico’s sixth-largest property-casualty insurer will add coverage of autos, homes and small businesses, according to a statement today from Zurich-based Ace.
Ace Chief Executive Officer Evan Greenberg has been using acquisitions to expand in emerging markets in Latin America and Asia. He announced a deal last month to buy Fianzas Monterrey in Mexico from New York Life Insurance Co. for $285 million. Detroit-based Ally, led by Chief Executive Officer Michael Carpenter, previously divested a U.S. auto insurer.
“Taking these actions with respect to the international operations will enable Ally to further invest in and grow its leading U.S.-based automotive services and direct banking franchises and be best-positioned to return additional capital to the U.S. taxpayer,” Carpenter said in a separate statement.
Returning capital to the U.S. Treasury Department, which owns 74 percent of Ally after bailouts of $17.2 billion, remains a priority and must be approved by the Federal Reserve, Proia said in an e-mail. She declined to comment on whether any of the sale proceeds will go to the Treasury.
The sale of Ally’s international units may allow the company to repay two-thirds of the government rescue, Carpenter said in a May interview. The Mexican deal is the first of those transactions, and it’s scheduled to close in the first half of 2013, according to Ace. It’s expected to add to Ace’s profit in the first year and meet or exceed long-term targets for return on equity by the third, Greenberg said.
Ace rose 2.2 percent to $81 at 12:05 p.m. in New York trading. The stock is up 16 percent this year, about the same as the Standard & Poor’s 500 Index.
Ally’s $932.5 million of 8 percent bonds maturing in November 2031 were mostly unchanged on the day at 119.13 cents on the dollar, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The security, which has risen from 93 cents in November, yields 6.3 percent.
Mayer Brown gave legal advice to Ace in the transaction, according to a statement, while UBS AG acted as financial adviser.