Ally, CardWorks scrap merger because of COVID-19
The coronavirus pandemic sabotaged another merger in the financial-services space.
Late Wednesday, Ally Financial and Cardholder Management Services (CardWorks) announced that they have mutually agreed to terminate their merger agreement, which had been first disclosed on Feb. 18.
According to a news release, the board of directors for each company approved the termination after carefully considering the meaningful impacts of COVID-19 on global markets and the economy. Officials said neither party will incur any termination or break-up fees as a result of the mutual decision to terminate the merger agreement.
“Given the unprecedented economic and market conditions resulting from the COVID-19 global pandemic, Don Berman and I, along with our boards of directors, believe it is in the best interests of our customers and stakeholders to terminate the agreement,” Ally chief executive officer Jeffrey Brown said. “This was a difficult decision to make following a long process to bring two strong companies together. I want to express my deep appreciation for the considerable efforts and incredible commitment demonstrated by Ally and CardWorks employees.
“Ally’s long-term strategic priorities remain intact, rooted in a relentless focus on our customers,” Brown continued. “Our industry-leading businesses and robust capital and liquidity positions will enable us to continue serving as a source of strength during these uncertain times for all of our customers. We will leverage these strengths as we grow and diversify our company moving forward. Ally is resilient and adaptable, powered by a vibrant, inclusive culture that will continue to ‘Do It Right’ for our customers, our communities and our shareholders.”
CardWorks is a leading servicer of nationally-branded MasterCard/Visa cards, private label cards, secured cards, and other unique products, as well as secured and unsecured installment loans.
“After careful consideration, Jeff Brown and I, along with our boards of directors, concluded that it would be in the best interest of our customers and our stakeholders, to terminate the agreement,” CardWorks founder, chairman and chief executive officer Don Berman said in a separate news release. “CardWorks has proven through previous recessions to be a great company in difficult times.
“CardWorks is in an exceptionally strong financial position and our long-term strategic priorities remain intact,” Berman continued. “Each of our business lines continues to perform extremely well during these challenging and uncertain times. We have been focused on the well-being of our people and our communities during our entire 32-year history, including through these difficult events of 2020.
“As a private company we are excited to continue to grow our unique business and execute on our long-term strategic initiatives while delighting our clients and customers,” he went on to say.
The situation involving Ally and CardWorks developed similarly to one announced in May involving one of the largest capital providers in the buy-here, pay-here dealership space.
On May 26, Texas Capital Bancshares, the parent company of Texas Capital Bank, announced that Texas Capital Bancshares and Independent Bank Group, the holding company for Independent Bank, mutually agreed to terminate their merger agreement.