Computershare (ASX:CXU) has concluded that the US mortgage servicing business is not the gold mine that the company once thought.
Computershare entered the loan-servicing market with the purchase of Specialized Loan Servicing in the US in 2011 and has added to the business with a couple of add-on purchases. However, on Tuesday, it revealed it had decided to exit the operation in a deal worth $720 million (around $1.1 billion AUD).
The buyer is Rithm Capital Corp, a $4.4 billion market value property group. Rithm Capital is a real estate investment trust (REIT) that owns several operating companies, largely in the mortgage industry. Rithm used to be known as New Residential but changed its name to reflect its broadening focus. Rithm is known primarily for its mortgage origination business.
“Today we are pleased to announce the sale of the business to Rithm. Rithm has strong mortgage industry credentials and the ability to bring capital to scale the business further,” Computershare said.
“With its track record of successful M&A execution and integration, we expect a smooth transition for the business and our customers,” Computershare said in the statement to the ASX.
“Today’s announcement represents an important milestone in executing Computershare’s simplification strategy and drive to increase the quality and consistency of earnings.
“The divestment of US Mortgage Services allows us to focus our efforts on our core businesses which have high levels of recurring revenues, long-term growth runways, low capital intensity, and attractive returns through the cycle.
The proceeds from the sale will enhance Computershare’s flexibility to pursue strategic investments and consider further capital management opportunities. We thank the management and employees of the business for their hard work and successes along the way and wish them the very best for their next chapter.”
Investors in Computershare won’t like talk of “flexibility to pursue strategic investments,” but they will like the phrase in the statement “and consider further capital management opportunities” from the $15.6 billion company.