LONDON, UK / ACCESSWIRE / January 5, 2017 / Active Wall St. blog coverage looks at the headline from Walter Investment Management Corp. (NYSE: WAC) ("Walter") as the Company announced on January 04, 2017, the execution of a Stock Purchase Agreement (SPA) pursuant to which Walter has agreed to sell 100% of the stock of its indirect, wholly-owned subsidiary, GTI Holdings Corp. ("GTIH") to a wholly-owned subsidiary of Assurant, Inc. (NYSE: AIZ) ("Assurant"). The deal was completed via a Stock Purchase Agreement (SPA) and the transaction is valued at $125 million. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
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Commenting on the sale, Anthony N. Renzi, CEO and President of Walter Investment said:
"We are pleased to have executed the SPA with Assurant relating to the sale of our insurance business. This transaction is expected to reduce the complexity of our business operations and allow us to better focus on our process efficiency efforts to improve the performance of our core servicing and originations businesses. We look forward to continuing our relationship with Assurant."
Alan Colberg, President and CEO of Assurant added:
"This acquisition enables Assurant to further its strategic focus in the housing market by expanding our voluntary offerings, through this distribution channel, to new and existing clients."
The details of the sale
As per the SPA, Walter Investment has sold off 100% stock of its indirect wholly-owned subsidiary, GTIH, which is the holding company of Green Tree Insurance Agency, Inc. Green Tea is the primary licensed insurance agency of Walter Investment. The affiliate of Assurant has agreed to pay a purchase price of $125 million in cash for Green Tree Insurance Agency, and its affiliates. Apart from the purchase price, Assurant's affiliate will also make an additional payment of $25 million to Walter's subsidiary towards potential earn-outs based on future performance.
The deal is expected to close in the first quarter of 2017, subject to various closing conditions.
Benefits for Assurant
Assurant is a global provider of risk management solutions and focuses on the housing and lifestyle markets. Its product portfolio includes mobile device protection, extended service contracts, vehicle protection, pre-funded funeral insurance, renter's insurance, lender-placed homeowner's insurance, and mortgage valuation and field services. As of September 30, 2016, Assurant owns approximately $30 billion in assets and has annualized revenue of $6 billion.
Assurant has an existing relationship with Green Tree and it earns underwriting profits from Green Tree's voluntary homeowners' and manufactured housing insurance sales. With this acquisition, Assurant will be able to expand its voluntary insurance offerings to new and existing clients. Assurant expects to earn approximately $25 million in annualized premiums and fees for the year 2017 from the current acquisition with potential for business expansion in future.
Green Tree and its affiliates reported earnings of $31 million for the nine-month period ending on September 30, 2016. Assurant expects that the transaction will have minimal impact on its GAAP earnings in 2017. After the completion of the transaction Green Tree Insurance Agency will be an indirect, wholly-owned subsidiary of Assurant.
Impetus behind Walter Investment's divestment
Walter Investment had reported a GAAP net loss of $101.8 million for the quarter ended September 30, 2016. The net loss for the nine-month period ending on September 30, 2016 was a net loss of $506.9 million, or $14.15 a share. With this backdrop, the new CEO for Walter Investment, Anthony Renzi, joined the Company in September 2016. He took up the initiative for organization restructuring and capital efficiency. He made changes in the top management with new hires. On the business end, he steered the Company towards a more fee-for-service business by selling off non-core parts of its businesses. The divestments helped Walter Investment to strengthen its balance sheet by reducing its interest rate risk exposure and freed up capital which was used to pay off its debts. In November 2016, Walter Investment sold off some of its assets to the subsidiary of New Residential Investment Corp. (NYSE:NRZ).
At the closing bell, on Wednesday, January 04, 2017, Walter Investment Management's share price finished yesterday's trading session at $5.05, climbing 2.02%. A total volume of 450.68 thousand shares exchanged hands, which was higher than the 3 months average volume of 387.91 thousand shares. The stock has surged 17.99% and 88.43% in the last three months and past six months, respectively. Furthermore, since the start of the year, shares of the Company have gained 6.32%. The stock currently has a market cap of $185.28 million.
Assurant's stock rose 1.03%, ending the trading session at $95.09. A total volume of 459.08 thousand shares were traded at the end of the day. In the last six month and previous twelve months, shares of the Company have advanced 12.69% and 22.11%, respectively. Moreover, the stock gained 2.40% since the start of the year. The Company's shares are trading at a PE ratio of 10.14 and have a dividend yield of 2.23%.
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