Yellow Brick Road announced this morning that it has signed an agreement to acquire Resi Mortgage Corporation for $36 million.
The deal will involve $28 million in cash and $5.5 million in Yellow Brick Road shares. A deferred amount of up to $2.5 million will also be payable one year after settlement subject to certain earning conditions.
According to Yellow Brick Road, acquiring the privately-owned mortgage manager and originator will give Yellow Brick Road enhanced scale and national presence.
It also offers a “complementary business model in mortgage origination and management” and “significant opportunities for growth” of Yellow Brick Road products through the Resi network.
Resi is a profitable business with a strong management team, and is one of the very few remaining non-banks of scale not owned by a big four bank, Yellow Brick Road added.
Executive chairman Mark Bouris said the acquisition was another important milestone in Yellow Brick Road’s strategy to become a leader in the non-bank sector.
“We welcome the Resi franchisees, management and staff to the Yellow Brick Road group and look forward to leveraging our marketing platforms to significantly increase Resi’s lead flow as part of our combined group,” he said.
The acquisition is subject to YBR shareholder approval. A meeting is expected to be convened for late August to consider the acquisition, with the deal expected to settle on August 29.
That is also the date on which the Vow Financial acquisition is expected to occur.
Mr Bouris said Vow brokers also stand to gain from the Resi deal.
“The complementary skills and relative strengths of the Yellow Brick Road, Vow and Resi brands and businesses will combine to provide Resi franchisees, Yellow Brick Road branch licensees and Vow brokers with unparalleled opportunities to build revenues and market position as we progress our strategy to be a leader in the non-bank sector,” he said.
Yellow Brick Road announced in March that it was in talks to acquire three groups: an aggregator, which turned out to be Vow, a mortgage manager, which turned out to be Resi, and a lead generation group.
Meanwhile, Yellow Brick Road has secured $42 million in a capital raising exercise after going to market to raise $38 million.
Of that, $12 million was provided by shareholder Macquarie and $12 million by Pink Platypus, which is owned by shareholder Nine Entertainment Company. The other $18 million was provided by institutional investors.
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