GMAC to Buy Bank of New York Unit for $1.8 Billion

The financing arm of General Motors Corp. said Tuesday that it had agreed to pay $1.8 billion for the commercial finance unit of Bank of New York in a bid to diversify its business away from automotive financing.

The cash acquisition of BNY Financial Corp., expected to close by the end of the second quarter, would enable Detroit-based General Motors Acceptance Corp. to boost its asset-backed lending business globally and enter the factoring market to serve as a credit collection service. A company would sell its receivables to GMAC at a discount, enabling GMAC to collect the receivables and pocket the proceeds.

“It will provide GMAC with a solid platform to become an industry leader in commercial finance,” GMAC Chairman John Finnegan said.

In New York Stock Exchange trading, GM shares fell $1.38 to close at $67.75, while Bank of New York shares rose $2.38 to close at $37.06.

Automotive analyst David Healy of Burnham Securities said the acquisition, the largest ever for GMAC, is one of several steps the company has taken to expand business away from its core automotive financing.

GMAC made a buyout offer for an undisclosed sum for home equity lender ContiFinancial Corp. in May. But on Monday, New York-based ContiFinancial agreed instead to sell its automotive finance unit, Triad Financial Corp., to a unit of Ford Motor Co. A GMAC spokesman declined to say if the company was still interested in ContiFinancial.

The merged entity, to be named GMAC Commercial Credit Corp., would be headed by BNY Financial Chairman and Chief Executive Joseph Grimaldi. BNY Financial would keep its 900 employees after the transaction.

Bank of New York said the sale would hurt its earnings this year.