With an IPO in Sight, Ally Chooses Four Investment Banks

Once the investment banks are contracted, there’s no turning back on an initial public offering.

That’s where Ally finds itself now that it has reportedly chosen Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley to lead its stock sale.

The news comes from the DealBook blog of the The New York Times.

There had been various reports that Ally was fielding pitches from Wall Street banks last week. One reason for the IPO is to allow the Treasury Department to exit its TARP investment in Ally, formerly known as GMAC.

Both Morgan and JPMorgan handled the GM IPO late last year.

According to DealBook, the investment banks handling the IPO should not expect a windfall of profits.

The fees aren’t expected to be particularly high; G.M.’s initial offering fetched Morgan Stanley and JPMorgan a rate of just 0.75 percent.

It is difficult for us to determine a prospective valuation until we’ve had a chance to review the S1. That said, Ally today claimed to be the No. 1 auto finance company in the nation: 

Ally Financial has financed more consumer new vehicle purchases in the U.S. than any other lender during 2010, according to AutoCount data by Experian Automotive.

In 2010, Ally financed more than 803,000 new vehicle purchases, resulting in nearly $23 billion in consumer retail contracts in the U.S. This represents an approximately 60 percent increase in new vehicle originations compared to 2009. …

In total, combining new and used vehicles, purchases and leases, Ally financed $31.6 billion in consumer auto contracts in the U.S. in 2010. Ally financed nearly 1.2 million vehicles, an increase of more than 80 percent from 2009. In addition, the company provided financing for more than 2.8 million vehicles sold to over 5,000 dealers in 2010, an increase of nearly 80 percent from the prior year.

That should bode well for the company’s valuation, I would think.