Real estate investment trust New Residential Investment Corporation said on Wednesday it will acquire Caliber Home Loans Inc. for US$1.675bn in cash as a strong US housing market bolsters the mortgage lending business.
To finance the buyout, New Residential will sell 45 million common shares to raise about US$500m. The rest of the funding stems from US$675m in cash from New Residential and $500m from Caliber's own cash position, according to BTIG analyst Eric Hagen. New Residential estimated the price tag for Caliber is about 1.0x tangible book value.
"With this acquisition, we have significantly strengthened our capabilities to perform across interest rate environments,” Michael Nierenberg, chairman, chief executive officer and president of New Residential said in a statement.
New Residential and Caliber are both active issuers of private-label US residential mortgage-backed securities to fund the loans they originate. Caliber recorded US$80bn in loan volume in fiscal 2020, while New Residential originated US$62bn.
"Our combination of strategies will allow us to accelerate our leading position in purchase lending, grow our digital direct to consumer and broker initiatives, and further propel our retail franchise," Caliber CEO Sanjiv Das said.
The buyout, which is expected to be completed in the third quarter, will bring US$141bn of Caliber's unpaid balances of mortgage servicing rights to New Residential.
"We view the deal terms positively considering most monoline mortgage originators trade above book value, and it significantly ramps NRZ's origination capabilities, which we see helping potentially enhance the risk management of the MSR portfolio," BTIG analyst Eric Hagen wrote in a note on the deal.
Citigroup Global Markets and Goldman Sachs were the financial advisors to New Residential, while Credit Suisse and Barclays advised Caliber and its owner Lone Star.