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TD Bank Group to acquire Chrysler Financial

TORONTO, Ontario, December 21, 2010 — TD Bank Group (TD) (TSX and NYSE: TD), and Cerberus Capital Management, L.P. (Cerberus), today announced an agreement under which Chrysler Financial will be sold to TD for cash consideration of approximately $6.3 billion. The purchase is comprised of net assets of $5.9 billion and approximately $400 million in goodwill. TD does not intend to issue common equity in connection with this transaction.

Under the terms of the agreement, TD Bank, America's Most Convenient Bank®, a wholly-owned subsidiary of TD, will acquire Chrysler Financial in the U.S. and TD will acquire Chrysler Financial in Canada. The acquisition will give TD all of Chrysler Financial's processes and technology as well as its existing portfolio of retail assets on both sides of the border. Following this transaction, the business - combined with TD's current platforms in Canada and the United States - will be positioned as a top 5 bank-owned auto lender in North America.

"This transaction represents a unique opportunity to purchase a great organic growth platform at an attractive price," said Ed Clark, Group President and CEO, TD. "Chrysler Financial is a well-run business with the capacity for significantly higher returns over the next several years. This acquisition will allow us to leverage our lending expertise and financial strength to expand our presence in a large North American market with tremendous potential upside."

Clark continued: "Because we're well-capitalized and a leading deposit franchise, we've been looking for opportunities to accelerate the growth of our loan book. This acquisition gives us that opportunity and also diversifies our lending portfolio."

The acquisition will give TD a platform for asset generation in the North American automotive lending market, enabling it to significantly grow its consumer loan portfolio. In addition to the existing dealer relationships that TD has in Canada and the U.S., Chrysler Financial's dealer clients serve approximately 1 million customers. TD expects that the business could generate a return on invested capital of approximately 20% in three to four years, once it is operating at a steady run rate for target originations.

With about 1,850 employees in Canada and in the United States, Chrysler Financial has more than 45 years of operating experience in the consumer and commercial auto financing market. It is one of the largest auto financing firms in North America, with a strong service culture. In the U.S., the automotive finance industry is the second largest non-mortgage consumer asset class after credit cards. It comprises about $650-700 billion in outstanding receivables and $350-400 billion in annual originations on a normalized basis. Chrysler Financial plans to focus on the prime market.

"Joining forces with TD will benefit both our customers and our dealer network," said Tom Gilman, CEO, Chrysler Financial. "Under Cerberus's ownership, Chrysler Financial has preserved its technology platform, retained top talent and maintained key capabilities. This transaction positions us for future growth with the financial strength of TD, one of the soundest, best capitalized and best managed banks in the world."

The acquisition is expected to close in the second quarter of TD's fiscal 2011, pending regulatory approvals and satisfaction of other customary closing conditions. Following the completion of the transaction, Chrysler Financial will continue to operate as a North American business overseen by Tom Gilman and headquartered in Toronto. TD expects to rebrand Chrysler Financial under the TD brand by spring 2011.

"This transaction with TD is the right next step for the future of these businesses, their employees and customers," said Mark Neporent, Senior Managing Director and Chief Operating Officer, Cerberus. "It ensures that the acquired businesses will be part of a strong and well-capitalized financial institution, which will help create sustainable jobs."

Clark concluded: "This transaction takes our auto finance business to a new level and gives us access to a North American platform, top talent and systems and technology capable of processing over 2 million credit applications per year. The Chrysler Financial management team and sales force have a proven track record and extensive industry experience and will complement our existing lending expertise."

The transaction is expected to have Tier 1 capital impact on closing of approximately 55-60 basis points on a pro forma basis as at TD's last year-end. The transaction is expected to be neutral to earnings in 2011 on an adjusted basis and will add approximately $100 million in adjusted earnings in 2012, the first full year of operations.

News source: TD Bank Financial Group


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