By Kimberly Chin
Redfin Corp. has agreed to acquire Bay Equity Home Loans in a cash and stock transaction of approximately $135 million, with the company aiming to be a one-stop shop for brokerage, lending and other services.
The Seattle-based company, Redfin, plans to pay two-thirds of the purchase price in cash and one-third in Redfin stock.
Founded in 2007, Bay Equity Home Loans is a full-service national lender in 42 states, which is nearly 10 times the size of Redfin’s current lending business, Redfin said. Corte Madera, California, had an $8.5 billion build-up in 2021. Redfin had a $985 million build-up.
Redfin said the Bay Equity metric will help Redfin offer loans more efficiently and get better terms when selling those loans to investors. She added that Bay Equity’s loan creation system will also help the company reduce its spending on lending programmes.
The Bay Equity management team will continue to operate under the mantle of Bay Equity. You will continue to create mortgages for clients who work with Redfin agents or other brokerages, or for clients seeking refinancing.
Redfin’s revenue more than doubled in the third quarter as the company benefited from strong home buying demand spurred by the pandemic. The company has expanded its brokerage services and has crossed 100 service markets.
Redfin said it will standardize its mortgage lending operations under Bay Equity. As a result, it will cut 121 Redfin Mortgage employees, or less than 2% of its total staff, primarily in the sales support, capital markets and areas of operations, the company said. Some employees, including loan officers at Redfin, will move to Bay Equity. The company has no plans to cut Bay Equity employees.
Redfin expects to incur a one-time fee of approximately $6 million to $7 million related to workforce reductions, and approximately $3.5 million in transaction advisory fees. It will also incur approximately $2 million to $3 million in impairment charges on its in-house developed software focused on mortgage.
However, Redfin expects the transaction to increase earnings per share in 2022.
The deal is scheduled to close in the second quarter.
Write to Kimberly Chin at email@example.com