The Mortgage Choice Limited (ASX: MOC) share price is going gangbusters today after the company announced it is the subject of a proposed acquisition by REA Group Limited (ASX: REA). At the time of writing, the mortgage broker's shares have surged a whopping 61.7% to $1.90.
Meanwhile, the REA Group share price is currently trading 2.23% lower at $136.94. By comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.04%.
Let's take a closer look at the proposed Mortgage Choice, REA Group deal.
What did Mortgage Choice announce?
The Mortgage Choice share price is through the roof today following news of the proposed takeover. In separate statements to the ASX, both Mortgage Choice and REA Group declared they have entered into a scheme implementation agreement (SIA).
Under the proposal, REA Group will purchase 100% of Mortgage Choice shares for $1.95 each. That price represents an outstanding:
- 66% premium on Friday's close.
- 66.8% premium on the 1-month value weighted average price (VWAP).
- 55.6% premium on the VWAP since the release of its H1 FY21 results.
- 42.5% premium on the 3-month VWAP.
- 52.0% premium on the 6-month VWAP.
The Mortgage Choice board voted unanimously to approve the deal, subject to shareholder approval.
There are, however, still some administrative hurdles to clear before the deal can be finalised. Besides approval by the broker's shareholders, the deal is also subject to:
- Court approval.
- Foreign Investment Review Board approval.
- No material adverse changes in either company.
- An "independent expert concluding the Scheme is in the best interests of Mortgage Choice shareholders."
In addition, if the deal were to fall through, either party would be liable to pay the other a $2.4 million break fee.
Mortgage Choice shareholders are expected to vote on the deal around mid-June 2021.
Management commentary
Speaking about the upcoming deal, Mortgage Choice chair Vicki Allen said
Joining forces with REA, and in particular their Smartline broking business, combines our strong brand with REA's impressive digital capability and property insights. It further establishes Mortgage Choice as one of the leading broking groups in Australia and will enable Mortgage Choice to operate at greater scale with an improved service offering to brokers and their customers.
The Scheme provides certainty for shareholders to realise a significant value premium of 66.0% to our closing share price on 26 March 2021. The Mortgage Choice Directors consider this to be a very attractive offer for Mortgage Choice shareholders and unanimously recommend that shareholders vote in favour of the Scheme, subject to there being no superior proposal emerging and to the independent expert concluding that the Scheme is in the best interests of Mortgage Choice shareholders.
REA Group listed the following reasons for proposing the acquisition:
- Leveraging REA's digital expertise, high intent property seeker audience and unique data insights across a larger network.
- Providing a compelling opportunity to establish a leading mortgage broking business with increased scale.
- Complementing the existing Smartline broker footprint resulting in greater national broker coverage.
In addition, REA Group CEO, Owen Wilson, commented:
The acquisition of Mortgage Choice represents an exciting opportunity for REA to create a leading broking business. It builds on our success to date, accelerating our financial services strategy while leveraging our existing strengths and capabilities.
Mortgage Choice share price snapshot
After today's stunning increase, the Mortgage Choice share price has now surged by more than 200% over the past year. Mortgage Choice shares are also up by around 28% year to date thanks to today's gains.
Based on the current share price, Mortgage Choice has a market capitalisation of around $147 million.
Meanwhile, the REA share price has also rallied by nearly 70% over the past 12 months.
