Walter Investment Management (WAC) in Tampa, Fla. said Tuesday that it is acquiring Reverse Mortgage Solutions for $120 million.
The deal for RMS, based in Spring, Texas, would establish Walter as one of the nation's largest reverse mortgage firms.
RMS is the country's fourth-largest reverse mortgage servicer, with about $12 billion in unpaid principle balance through the first half of 2012. Walter Investment is an asset manager as well as a mortgage servicer and portfolio owner. The company specializes in less-than-prime, nonconforming and credit-challenged mortgages. The deal for RMS will expand Walter's "high-margin, fee-for-service business model," the company said.
Walter Investment's shares hit a 52-week high on news of the deal, rising more than 14% Tuesday to close at $31.94.
"RMS is viewed as a preeminent servicer and originator in the reverse mortgage industry," said Mark J. O'Brien, Walter Investment's chairman and chief executive, said in a news release. "The sector has very attractive long-term growth prospects and is currently undergoing significant structural change, providing us with an opportunity to capitalize on those dynamics."
Walter Investment said it will pay $60 million in cash, $25 million in stock and assume $35 million note that is backed by mortgage servicing rights. It anticipates the acquisition to be "significantly accretive" to both earnings and cash flow. The deal is not expected to close until next quarter, but had it closed early this year, it would have boosted Walter Investment's 2012 earnings per share by 25%, the company said.