(Reuters) - Toronto-Dominion Bank will buy Chrysler Financial from private equity firm Cerberus Capital Management for $6.3 billion, joining the throng of Canadian institutions expanding foreign operations.

The deal, comprising net assets of $5.9 billion and about $400 million in goodwill, will make Canada's No. 2 bank one of North America's top five bank-owned auto lenders. It consists of net assets of $5.9 billion and about $400 million in goodwill, TD said on Tuesday.

The bank said it does not intend to issue common equity in connection with the deal, in contrast to rival Bank of Montreal, whose shares slumped on Friday on news that it would issue shares to fund last week's takeover of troubled Wisconsin lender Marshall and Ilsley.

TD stock was up 2.4 percent at C$72.21 on the Toronto Stock Exchange soon after the market opened.

TD said its purchase should not affect 2011 earnings and will add about $100 million to adjusted 2012 earnings.

"On an earnings basis, it looks expensive off of just the price of that 2012 accretion number they are talking about,", said Brian Klock, an analyst at Keefe, Bruyette & Woods, Inc in San Francisco.

But on the plus side, the goodwill was relatively low, there was very little integration risk, and the bank was not issuing capital to fund the takeover, boosting the chances that the market would like the deal, he added.

The transaction is a vote of confidence in the recovering U.S. economy from TD, which has already expanded in the United States and which been looking to grow its loan book.

Klock said TD is far heavier on U.S. deposits than it is on loans, so it can fund the new loan book more cheaply than Chrysler Financial could have done.

"They've got the capital to absorb the extra assets and the way they are internally generating capital, this should help profitability and returns for the company," he said.

TD said its U.S. unit will acquire Chrysler Financial in the United States, and the Canadian parent will acquire Chrysler Financial in Canada in the deal, which also gives it Chrysler Financial's processes and technology as well as its existing portfolio of retail assets.

HEALTHY CANADIAN BANKS

Canada's big banks exited the financial crisis in stronger shape than most rivals, and have been buying up assets.

"This transaction represents a unique opportunity to purchase a great organic-growth platform at an attractive price," TD Chief Executive Ed Clark said in a statement.

"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."

TD said the addition of Chrysler Financial's dealer clients, who serve about 1 million customers, could generate a return on invested capital of about 20 percent in 3-4 years.

Chrysler Financial, the former lending arm of the automaker, had its operations reduced as part of a U.S. government-sponsored restructuring of Chrysler and General Motors last year.

Cerberus lost control of the automaker during the restructuring but held on to the financing company, some of whose operations were taken over by Ally Financial Inc, the auto and mortgage lander formerly known as GMAC.

TD's U.S. operations include the TD Bank network on the East Coast, and it has a large stake in online broker TD Ameritrade. TD, which bought Commerce Bancorp Inc for $7.7 billion in 2007, has made small U.S. retail bank acquisitions in the last two years.

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