Home Point Financial Corp. will buy Stonegate Mortgage Corp. in an all-cash deal valued at roughly $211 million.
Stonegate's shareholders will receive $8 per share under the merger agreement. That price represents a 61% premium over Stonegate's 90-day volume weight average price as of Jan. 26 and a 34% premium over its Jan. 26 closing price.
Ann Arbor, Mich.-based Home Point Financial is a subsidiary of financial services holding company Home Point Capital, which itself is owned by members of management and investment funds managed by Stone Point Capital. Following the merger, the combined company will remain private. (Indianapolis-based Stonegate is currently publicly traded).
Following the deal, Home Point will be a top-25 mortgage originator and servicer on a pro-forma basis, the company said Friday. Stonegate is also the parent of warehouse credit provider NattyMac.
"The combined business will have full national coverage across all channels of mortgage origination, as well as vertical integration across the mortgage value chain," Home Point CEO Willie Newman said in a news release. "Most important, the talent and experience of the combined team will give us the ability to fulfill Home Point's vision of being a leader in mortgage banking and financial services."
In connection with the merger agreement, Stonegate's board of directors adopted a tax asset protection plan, which constitutes a poison pill designed to safeguard Stonegate from an investor takeover before the deal is closed. Stonegate enacted the plan because, as of September 2016, it had $163.5 million in U.S. federal net operating loss carryforwards.
"Home Point's ability to use the tax attributes of Stonegate Mortgage may be significantly limited if there were an 'ownership change' (as defined under Section 382 of the Internal Revenue Code) prior to the closing of the proposed merger," the companies said in the release. Such an ownership change would take place if there was a change in the ownership of Stonegate Mortgage by 5% stockholders that exceeded 50 percentage points over a three-year period.
According to the plan, the board of directors declared a dividend of a single preferred share purchase right for each outstanding share of Stonegate. Those rights will be distributed Feb. 6 to current shareholders and to any subsequent stockholders after that date.
The plan is meant to discourage anyone from acquiring 4.9% or more of the company's outstanding stock. Existing shareholders who hold 4.9% or more of the company's outstanding shares are exempt from the plan unless they buy additional stock.
The companies noted that stockholders, directors and Stonegate executives who together hold roughly 36% of the company's outstanding stock have made agreements with Home Point to vote for the merger.
The merger is expected to close in the second quarter of 2017, pending customary closing conditions, including approval by Stonegate’s stockholders and regulators.
Kirkland and Ellis LLP and Sullivan and Cromwell LLP were Home Point and Stonegate's legal advisors, respectively. Barclays and FBR Capital Markets served as Stonegate's financial advisors, and Houlihan Lokey was Home Point's financial advisor.
