By Kimberly Chin
Redfin Corp. has agreed to acquire Bay Equity Home Loans in a cash and stock deal valued at approximately $ 135 million as the company aims to be a one-stop-shop for brokerage, lending and d ‘other services.
Seattle-based Redfin plans to pay two-thirds of the purchase price in cash and one-third in Redfin shares.
Founded in 2007, Bay Equity Home Loans is a national full-service lender in 42 states and is nearly 10 times the size of Redfin’s current lending business, Redfin said. The Corte Madera, Calif., Company had a total origination volume of $ 8.5 billion in 2021. Redfin’s origination volume was $ 985 million.
Bay Equity’s ladder will help Redfin produce loans more efficiently and secure better terms when those loans are sold to investors, Redfin said. Bay Equity’s lending system will also help the company reduce its spending on lending software, he added.
The Bay Equity management team will continue to be under the Bay Equity mantle. It will continue to provide mortgages for clients who work with Redfin agents or other brokerage firms, or for clients looking for refinancing.
Redfin’s revenue more than doubled in the third quarter as the company benefited from strong home purchase demand spurred by the pandemic. The company expanded its brokerage services and exceeded 100 markets served.
Redfin has said it will consolidate its mortgage operations under Bay Equity. As a result, it will cut around 121 employees of Redfin Mortgage, or less than 2% of its total workforce, primarily in the areas of sales support, capital markets and operations, the company said. Some employees, including Redfin’s loan officers, will be transferred to Bay Equity. The company has no plans to fire Bay Equity employees.
Redfin expects to incur a one-time charge of about $ 6-7 million related to downsizing, and about $ 3.5 million in transaction advisory fees. It will also incur an impairment charge of approximately $ 2-3 million on its in-house developed mortgage-focused software.
Nonetheless, Redfin expects the transaction to generate earnings per share in 2022, he said.
The deal is expected to be finalized in the second quarter.
Write to Kimberly Chin at [email protected]