Acquisition of Ally Financial International Operations

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Acquisition of Ally Financial International Operations

Acquisition of Ally Financial International Operations

In November 2012, we entered into a definitive agreement with Ally Financial to acquire 100% of the outstanding equity interests in the top level holding companies of its automotive finance and financial services operations in Europe and Latin America and a separate agreement to acquire Ally Financial's non-controlling equity interest in SAIC-GMAC, which conducts auto finance operations in China.

On April 1, 2013, we completed the acquisition of Ally Financial's European and Latin American auto finance and financial services operations except for France, Portugal and Brazil. On June 1, 2013, we completed the acquisition of Ally Financial's auto finance and financial services operations in France and Portugal, and on October 1, 2013 we completed the acquisition of Ally Financial's auto finance and financial services operations in Brazil. The aggregate consideration for these acquisitions was $3.3 billion, subject to certain closing adjustments. In addition, we repaid debt of $1.4 billion that was assumed as part of the acquisitions. We recorded the fair value of the assets acquired and liabilities assumed on the acquisition dates.

On January 2, 2015, we completed a transaction under which we acquired Ally Financial's 40% equity interest in SAIC-GMAC. The aggregate purchase price was approximately $1.0 billion, subject to certain post-closing adjustments. Also effective on January 2, 2015, we sold a 5% equity interest in SAIC-GMAC to SAIC FC, a current shareholder of SAIC-GMAC for a purchase price of approximately $120 million, subject to certain post-closing adjustments. Payment of the purchase price for this 5% equity interest is subject to certain regulatory approvals and is due from SAIC FC to us by May 5, 2015. As a result of these transactions, we now own a 35% equity interest in SAIC-GMAC. The valuation of the equity interest acquired was not yet complete at the time of this filing on Form 10-K because it was not practicable.

The international operations were originally a part of General Motors Acceptance Corporation, the former captive finance subsidiary of GM, and due to this longstanding relationship, the majority of the international operations business is related to GM and its dealer network. With the acquisition of the international operations, we have expanded to become a global captive finance company, and expect to realize numerous strategic benefits, including increased finance penetration resulting from a broadened relationship with GM, geographic diversification of our customer base and transition of our business into a full-spectrum credit platform.

The acquisition of the international operations has been accounted for as a business combination, whereby the purchase price of the transaction was allocated to the identifiable assets and liabilities assumed based upon their fair values. The estimates of the fair values recorded were determined based on fair value measurement principles (see Note 10 - "Fair Values of Assets and Liabilities" for further discussion) and reflect significant assumptions and judgments. Material valuation inputs for finance receivables included adjustments to monthly principal and interest cash flows for prepayments and credit loss expectations; and discount rates developed based on the relative risk of the cash flows which considered loan type, market rates as of our valuation date, credit loss expectations and capital structure. Material valuation inputs for debt included discount rates developed based on the relative risk of the contractual cash flows, taking into consideration market rates and liquidity expectations for each country. Certain assumptions and judgments that were considered to be appropriate at the applicable acquisition date may prove to be incorrect if market conditions change.

The excess of the purchase price over the estimated fair values of the net assets acquired was recorded as goodwill, which is primarily attributed to the value of the incremental GM business expected. The goodwill amount was $138 million, and was assigned to our Latin America reporting unit. The goodwill will not be deductible for tax purposes.

The following table summarizes the aggregate consideration and the assets acquired and liabilities assumed with the acquisition of the international operations, excluding the equity interest in SAIC-GMAC (in millions):

	Acquired International Operations
Cash	$	607
Restricted cash	906
Finance receivables	15,144
Other assets, including identifiable intangible assets	781
Secured and unsecured debt	(12,833		)
Other liabilities	(1,483		)
Identifiable net assets acquired	3,122
Goodwill resulting from the acquisition	138
Aggregate consideration	$	3,260

The following table provides information related to finance receivables acquired which had no deterioration in credit quality as of the applicable acquisition dates (in millions):

	Consumer		Commercial
Contractually required payments receivable	$	10,687	$	4,947
Cash flows not expected to be collected	$	276	$	27
Fair value	$	9,709	$	4,834

The results of the acquired operations are included in our results beginning April 1, 2013, except for the results of the operations in Portugal and France, which are included in our results beginning June 1, 2013 and the results of the operations in Brazil, which are included in our results beginning October 1, 2013. The following table summarizes the actual amounts of revenue and earnings of the international operations included in our consolidated financial statements for the year ended December 31, 2013 and the supplemental pro forma revenue and earnings of the combined entity as if the acquisitions had occurred on January 1, 2012 (in millions):

	International Operations Amounts Included in Results		Supplemental Pro Forma - Combined
	Year Ended December 31, 2013		Years Ended December 31,
			2013		2012
Total revenue	$	968	$	4,201	$	3,865
Net income	$	109	$	712	$	687