New Residential Investment Corp. and Home Loan Servicing Solutions Ltd. announced a definitive merger agreement on Sunday. The merger agreement sets for New Residential to acquire all of the outstanding shares of HLSS for $18.25 per share in cash, totaling approximately $1.3 billion. The purchase price represents a 9 percent premium to HLSS' closing price of $16.76 on Friday, February 20.
The Chief Executive Officer of New Residential, Michael Nierenberg, said he was pleased to announce the transaction with HLSS.
"The acquisition will significantly add to the value of our book of mortgage servicing assets and expand our relationships with mortgage servicers to include both Nationstar Mortgage and Ocwen Financial Corp., which are the two largest non-bank servicers in the United States," Nierenberg said. "We are confident that this transaction will enhance our earnings growth potential and our ability to generate strong returns for our shareholders."
New Residential, which is based in New York, was formed in 2013 as a wholly owned subsidiary of Newcastle Investment Corp. The company primarily targets investments in mortgage servicing related assets and other related investments. HLSS was formed to acquire mortgage servicing assets. Their principal offices are located in the Cayman Islands.
The acquisition is expected to close in the second quarter of 2015 pending the HLSS shareholder approval and other customary closing conditions. It has been approved by the Board of Directors of each company.
Advising New Residential on the acquisition were Bank of America, Merrill Lynch, and Credit Suisse as financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP, Sidley Austin LLP, and Maples and Calder as legal advisors. Advising HLSS on the transaction was Citi as financial advisor and Weil, Gotshal & Manges LLP and Walkers as legal advisors.
The Chief Executive Officer of HLSS, John Van Vlack, said New Residential provided HLSS with the most attractive offer.
"I am pleased that this transaction offers our investors cash equivalent to the book value of their shares and addresses the uncertainty associated with our future financing obligations," Vlack said. "Of the strategic proposals received, New Residential's was the most attractive for a variety of reasons including valuation and certainty of execution. We believe that New Residential is well positioned to provide support and act as a strategic financing party to Ocwen over the long-term."