Rocket announced its intention to acquire the real-estate brokerage firm Redfin for an impressive equity value of $1.75 billion. This acquisition, which aims to bolster Rocket's home-lending business, is designed to attract new users and improve their overall service offering. Under the terms of the transaction, investors of Redfin will receive 0.7926 common shares of Rocket for each share they hold, translating to a per-share value of $12.50.
This fixed exchange ratio represents a remarkable 63% premium over Redfin's volume weighted average price over the preceding 30 days leading to last Friday. In a parallel development, Redfin has expressed that it appraises the merger at a stinging $2.4 billion, highlighting its significance in the industry. The closing of this deal is expected during the second or third quarter of the year.
Following the announcement, Redfin's shares witnessed a substantial surge of nearly 70% on Monday trading, whereas Rocket experienced a downturn, declining 15%, which effectively wiped out gains secured over the past week. In a statement, Rocket's Chief Executive Varun Krishna expressed optimism regarding the deal, stating, "Rocket and Redfin have a unified vision of a better way to buy and sell homes.
We will improve the experience by connecting traditionally disparate steps of the search and financing process with leading technology that removes friction, reduces costs and increases value to American homebuyers." The acquisition will leverage Redfin's impressive traffic, boasting nearly 50 million monthly visitors on its home search platform.
Rocket anticipates achieving significant revenue synergies that will enhance business operations across various sectors: search, real estate brokerage, mortgage origination, title, and servicing. Notably, Rocket projects more than $200 million in run-rate synergies for the newly combined entity by 2027. Additionally, the company forecasts that this acquisition will positively impact its adjusted earnings per share by 2026.
In the previous year, Rocket swung to a profit of $0.23 a share, a significant turnaround compared to a loss of $0.07 the year prior. Conversely, Redfin reported a full-year loss widening to $1.36 a share from $1.16 in the previous year, despite achieving a revenue increase of 7% in the same period. Following the completion of this acquisition, the partnership between Rocket and Redfin is anticipated to yield a powerhouse technology company, merging the national scale of a lender, brokerage, title company, and home-search platform.
Redfin's Chief Executive Glenn Kelman expressed his intentions to remain with Redfin and continue leading the company while reporting directly to Krishna. When the transaction finalizes, Rocket shareholders are estimated to hold roughly 95% of the combined company, while Redfin investors would maintain around 5%.
The finalized price of Rocket's stock stood at $13.40, marking a change of -2.37, or a percent change of -15.03..