Home Capital Group Inc. has agreed to a C$1.7 billion ($1.3 billion) takeover by the co-founder of a rival financial firm. This comes after the Canadian mortgage lender nearly collapsed five years ago and was bailed out by Berkshire Hathaway Inc.
Home Capital Group Inc. has agreed to a C$1.7 billion ($1.3 billion) takeover by the co-founder of a rival financial firm. This comes after the Canadian mortgage lender nearly collapsed five years ago and was bailed out by Berkshire Hathaway Inc.
Smith Financial Corp., the family holding company of First National Financial Corp. co-founder Stephen Smith, is offering C$44 a share, a 63% premium to Home Capital's closing price on Friday. The announcement comes three months after the company disclosed it had received an approach from an unidentified buyer that it rejected as too low.
This deal would be a big increase in the financial-company holdings for Smith, who is still the executive chairman of the mortgage lender First National. Smith also has sizable equity positions in other financial firms, such as Fairstone Bank of Canada, Guaranty Mortgage Insurance Co., and EQB Inc.
After shares of Home Capital Group Inc. slid 31% this year, the company has received an offer from an unnamed suitor. The decline is due to rising interest rates cutting sales and prices in Canada’s housing market, which has put pressure on mortgage lenders.
The deal needs approval from two-thirds of Home Capital shareholders, as well as regulatory approval. The agreement also includes a go-shop period until December 30th, and break fees of $25 million and $50 million, depending on when the deal is broken.
BMO Capital Markets and TD Securities are acting as Home Capital's financial advisers. Deloitte LLP has provided a fairness opinion to Home Capital's board, and Torys LLP is the legal adviser.
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