New Residential Investment Corp., the parent company of NewRez, has announced a definitive agreement to acquire Caliber Home Loans from private equity firm Lone Star Funds in a $1.675 billion transaction.
It’s a big get for New Residential considering the large industry presence of Caliber, which originated $80 billion in loans last year. As of Dec. 31, Caliber also maintained a servicing portfolio of $153 billion with approximately 630,000 customers, and realized a 2020 pre-tax income of $891 million with a 53% return on equity.
Despite those figures, however, Lone Star had been working on offloading Caliber since an initial public offering (IPO) fell through late last year. The deal appears to satisfy the goals of both buyer and seller, with Lone Star able to move its asset after the failed IPO and New Residential gaining Caliber’s significant, multifaceted footprint across retail, wholesale and correspondent channels.
“We believe this is a terrific acquisition for our company,” said Michael Nierenberg, chairman, CEO and president of New Residential.
“The combination of NewRez and Caliber’s platforms will create a premier financial services company with scale, talent, technologies and products to accelerate our mortgage company objectives and generate strong earnings for our shareholders. With this acquisition, we have significantly strengthened our capabilities to perform across interest rate environments.”
Nierenberg praised Caliber’s purchase loan origination success and broad, national retail footprint, as well as its track record in retaining borrowers, with a recapture rate of 54%.
A press release from New Residential signaled that the company’s intent to combine the platforms of Caliber and NewRez, its wholly owned originator and servicer, to “bring together two complementary leading mortgage strategies” into a singular “premier financial services company.”
“We are excited to be joining the New Residential family,” said Caliber CEO Sanjiv Das. “By combining platforms with NewRez, we will join another industry pioneer that has complementary strengths and is committed to delivering the dream of homeownership. 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.”
“This transaction is yet another important milestone for NewRez as we continue to expand our business, grow our customer reach and provide more options to support our homeowners and clients,” concurred NewRez President Baron Silverstein. “Combining with Caliber’s platform emphasizes our commitment to positioning our business for long-term success while continuing to deliver significant value for our customers, our partners and our employees.”
New Residential announced the deal on the same day it commenced a public offering of 45,000,000 shares of common stock, the net proceeds of which will be used to finance the Caliber acquisition. The rest of the deal will be financed via a mix of existing cash, equity and available liquidity across the New Residential and Caliber combined balance sheet.
The transaction is set for closing in the third quarter, subject to the usual approvals and closing conditions.