Rithm (RITM) to Buy Computershare's Mortgage Arm for $720M
Rithm Capital Corp. RITM continues its acquisition streak with a new deal with Computershare Limited. RITM recently agreed to buy the Australian company’s U.S. mortgage services arm, Computershare Mortgage Services Inc., for around $720 million. The acquisition deal also includes Specialized Loan Servicing LLC, a mortgage sub-servicer.
The acquisition is expected to add mortgage servicing rights of around $136 billion in unpaid principal balance to RITM. Of this amount, $85 billion is third-party servicing. Specialized Loan Servicing’s origination services business will also be added to the acquired list.
The deal is expected to conclude in the first half of next year, following which, Specialized Loan Servicing’s portfolio and operations are expected to be managed by Rithm’s portfolio company Newrez LLC. The move is expected to boost Newrez’s special servicing business. It will help the company bring in more clients and homeowners to its platform.
The acquisition is likely to strengthen Newrez’s origination and servicing channels. It will expand RITM’s footprint in the highly competitive mortgage market. The deal is also likely to benefit Computershare, which will enable it to focus on its core operations with low capital intensity and attractive returns.
Rithm intends to fund the deal through a combination of existing cash, liquidity and additional mortgage servicing rights financing. It exited the second quarter with cash and cash equivalents of $1.4 billion, which increased 2.4% from the figure at 2022 end.
In August, the company partnered with American Real Estate Partners and GreenBarn Investment Group to buy a luxury 200-unit subdivision of townhouses in Ashburn, VA, for $120 million. It is also pursuing the $639 million Sculptor Capital Management acquisition announced in July.
Price Performance
Rithm’s shares have gained 17.5% in the year-to-date period against the industry’s fall of 3.4%.
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Zacks Rank & Key Picks
The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the broader Finance space are Axos Financial, Inc. AX, Sachem Capital Corp. SACH and Blackstone Inc. BX, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Axos Financial’s current-year earnings indicates 6.9% year-over-year growth. Also, the consensus mark for AX’s revenues in the current fiscal year suggests 14.2% year-over-year growth.
The Zacks Consensus Estimate for Sachem Capital’s current year earnings has improved by a penny in the past 60 days. During this time, SACH has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for the company’s revenues in 2023 suggests a 13.7% year-over-year jump.
The consensus mark for Blackstone’s current-year earnings is pegged at $4.16 per share, while the same for revenues stands at $10.6 billion. It has witnessed one upward estimate revision in the past 30 days against no downward movement. BX beat earnings estimates thrice in the past four quarters and met once, with the average surprise being 5.7%.
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