United Wholesale Mortgage Holdings Corp. said it will acquire Two Harbors Investment Corp. in an all-stock deal valued at $1.3 billion.
Pontiac, Michigan-based United Wholesale Mortgage said the deal significantly expands its footprint in the mortgage servicing landscape.
“This transaction is a true win for both stockholders and our mortgage broker partners,” said Mat Ishbia, Chairman and CEO of UWM, said. “The timing of doubling our servicing book as we bring servicing in-house is the perfect alignment, allowing us to deliver meaningful upside to stockholders and leverage increased cash flow to invest deeper into the broker network.”
The company said the merger combines United Wholesale Mortgage with St. Louis Park, Minnesota-based Two Harbors, a real estate investment trust and a servicer of conventional mortgages via its subsidiary, RoundPoint Mortgage Servicing LLC.
Ishbia said the acquisition of Two Harbors will allow WWM to “deliver meaningful upside to stockholders and leverage increased cash flow to invest deeper into the broker network.”
UWM said the transaction is based on a fixed exchange ratio of 2.3328 shares of UWM for each share of Two Harbors and represents an $11.94 per share value based on UWM’s closing price on Dec. 16. UWM shareholders will own about 87% of the combined company on a pro forma fully diluted basis, while Two Harbor’s shareholders will own the remainder in a tax-free transaction.
Board of Combined Company Will Expand
The board of the combined company is expected to expand to 11 directors, with one additional member designated by Two Harbors, UWM said.
By absorbing Two Harbors’ $176 billion mortgage servicing rights portfolio, UWM said it will nearly double its portfolio to about $400 billion. This deal will make the combined entity the eighth largest mortgage servicer in the United States.
UWM said the acquisition comes as UWM transitions its servicing operations in-house. By integrating Two Harbors’ capital markets expertise and RoundPoint’s servicing platform, UWM said it expects to realize about $150 million in annual cost and revenue synergies.
Two Harbors CEO Bill Greenberg said that the current economic climate favors such consolidation.
“Scale has become more important than ever in the mortgage industry,” Greenberg said. “We are very excited to partner with the largest mortgage lender in the country.”
In early December, Guild Holdings Co. (NYSE: GHLD), Guild Mortgage Co. and Bayview Asset Management LLC, jointly announced that Bayview MSR Opportunity Master Fund LP, a fund managed by Bayview, completed its all-cash acquisition of GHLD that was first announced in June. The transaction was an all-cash deal valued at approximately $1.3 billion in aggregate equity value.
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