Santander offers to buy remaining 20% of subprime auto lending arm

Santander Holdings USA is looking to buy the remaining 20% of its subprime auto lending arm, proposing to pay shareholders a premium to bring that business entirely under its umbrella.

In an SEC filing, the Spanish bank’s U.S. holding company, which already owns about 80% of the shares in Santander Consumer USA Holdings, proposed buying the rest from existing shareholders.

Investors would get a 7.4% premium from Santander Consumer’s closing price Wednesday of $36.32. Santander Consumer’s stock climbed after the announcement and was up about 12% to $40.77 on Thursday afternoon.

Ron Antonelli/Bloomberg

The proposal is subject to approval from Santander Consumer’s board of directors.

“Given our knowledge of the company, we are in a position to proceed with the proposed transaction in an expedited manner,” Timothy Ryan, the chairman of Santander Holdings USA, wrote in a letter to Santander Consumer’s chairman.

The most likely path forward is that the proposal will be accepted, according to Kevin Barker, a Piper Sandler analyst. He noted that the Dallas-based auto finance business is the most profitable part of Santander’s U.S. operations.

Santander Holdings USA has 100% ownership of other U.S. entities, including a retail bank, a private bank and a broker-dealer arm, according to a recent investor presentation.

Grupo Santander said in its first quarter earnings report that its strategy was “to increase the weight of the most profitable areas” of its business, including the Santander Consumer arm.