Ally Financial Inc. (NYSE:ALLY) has reached a mutual agreement with Cardholder Management Services (CardWorks) to terminate their proposed $2.65 billion merger deal that was announced on February 18, 2020.
Ally and CardWorks reach an agreement to call off merger deal
The companies’ board of directors reached a verdict calling for the termination of the agreement after considering the impacts the COVID-19 pandemic has had on the global economy and markets. Following the agreement’s termination, none of the companies will incur break up or termination fees as it was a mutual decision.
Considering the unprecedented market and economic conditions due to the COVID 19, the board of directors reached an agreement to terminate the deal. Jeffrey Brown the CEO of Ally Financial stated that terminating the deal was a tough decision but necessary and it is for the best interest of shareholders, and the company’s clients.
The merger meant to diversify Ally’s offering
Brown further affirmed that its long-term strategic targets remain unchanged with the focus being to “Do It Right” for Ally customers, shareholders as well as communiites. He stated that Ally’s industry-leading enterprises, solid liquidity, and capital positions will continue to act as a source of inspiration for all customers considering the current challenging times. Going forward, they will leverage their strengths as they diversify.
When the deal was announced in February, Ally indicated that a merger will further diversify its product offerings. This could be due to the addition of a recognized credit card platform, servicing and recovery operation, and a nationwide merchant acquisition business. Ally Financial considered the credit card issuing company focusing on non-prime sectors as an ideal addition to its business.
The merger deal required Ally to pay upfront cash of $1.35 billion and $1.3 billion in the form of common shares or around 39.5 million CardWorks shares. Goldman Sachs and Co represented Ally in the deal as financial advisor while Sullivan and Cromwell provided legal services. On the hand Wachtell, Lipton, Rosen&Katz acted on behalf of CardWorks as legal counsel.