Rocket Companies, a leading mortgage lender, has entered into an agreement to purchase the online real estate brokerage Redfin in an all-stock transaction worth $1.75 billion.
Announced on Monday, this acquisition will provide Rocket with access to an established network of over 2,000 real estate agents spanning 42 states. It also includes Redfin’s widely-used home and rental listings platform, which attracts nearly 50 million visitors each month.
The deal’s valuation positions Redfin at $12.50 per share, leading to a significant surge in its stock. Redfin’s stock, based in Seattle, soared by 68.5% to reach $9.81 per share in morning trading. Conversely, Rocket Companies, headquartered in Detroit, saw its shares fall by 15%.
Rocket Companies anticipates that the acquisition will generate $140 million in savings by eliminating redundant operations and expenses. Additionally, the deal is expected to increase Rocket’s revenue by over $60 million by facilitating connections between its clients and Redfin’s agents. This transaction also paves the way for Rocket to offer a suite of real estate services, including title insurance and loan servicing, to Redfin’s clientele.
Glenn Kelman, the CEO of Redfin, will continue to lead the real estate brokerage and will report directly to Rocket’s CEO.
According to the terms of the agreement, each Redfin common stock share will be converted into a fixed ratio of 0.7926 shares of Rocket’s Class A common stock. This exchange rate signifies a 63% premium over the average price of Redfin’s stock in the 30 days ending March 7.
Upon completion of the deal, current shareholders of Rocket Companies will possess about 95% of the newly formed entity on a fully diluted basis, while Redfin shareholders will hold around 5% ownership.
Though the board of directors from both companies have already endorsed the transaction, Redfin’s shareholders are still required to approve the sale. The companies anticipate that the acquisition will be finalized in either the second or third quarter of this year.
