Mr. Cooper Group (NASDAQ: COOP) shares jumped 16.3% as of 10:38 a.m. ET today, after the company announced that it is being acquired by leading mortgage company Rocket Companies.
Mortgage Industry Mergers
Rocket Companies has agreed to acquire Mr. Cooper Group in a stock deal for $9.4 billion ($143.33 per share), which is 35% higher than the company’s 30-day average share price. Prior to the deal closing, Mr. Cooper shareholders will also receive a $2 per share cash dividend. The deal is expected to close in the fourth quarter of the year.
Leadership and Financial Benefits
Mr. Cooper Group Chairman and CEO Jay Bray will become Chairman and CEO of Rocket Mortgage upon completion of the deal.
According to Rocket, the deal will add mid-teens percent earnings growth through 2026.
The company will incur $500 million in acquisition-related costs, but will save $400 million to $500 million annually.
Rocket’s Expansion Plan
Rocket also recently acquired Redfin ($1.75 billion deal). After the merger with Mr. Cooper Group, Rocket will process one in six mortgages in the United States, making it a dominant player in the market.
Mr. Cooper Group’s Magnificent Journey
The company, with a whopping 2,146% return over the past 5 years, is the largest mortgage servicer in the United States higher interest rates hurt other mortgage companies, but Mr. Cooper benefited, as fewer refinancings drove up the value of mortgage servicing rights (MSRs).
Is this the right time to cash in?
Shares are currently trading near $122, below the deal value ($143.33), so some investors may expect further upside. However, regulatory hurdles should also be considered.
Should you invest $1,000 in Mr. Cooper Group?
The Motley Fool Stock Advisors team has released a list of 10 Best Stocks, not including Mr. Cooper Group. While it’s a strong company, there are other opportunities to consider.
