Boston, MA 05/08/2014 (wallstreetpr) – Radian Group Inc (NYSE:RDN) will acquire Clayton to expand outsourcing services for the home-lending industry. Under the agreement, Radian will pay $305 million of cash to repay outstanding debts and purchase all outstanding shares of Clayton.
Radian expects to finance the transaction through the issuance of both debt and equity. The Company will issue 15.5 million of equity and bonds of $200 million to fund the acquisition.
Radian’s gain
Clayton is a leading solution provider to the mortgage industry. In last 12 months ended December 31, 2013, it reported net revenue of $135 million and net income of $9.1 million, including amortization of intangible assets (non-cash expenses) of $10.8 million.
So, Radian Group Inc (NYSE:RDN) expects that the transaction will reach breakeven in 2014 excluding the non-cash amortization expenses. The cash flow from Clayton will provide financial support to Radian as the former will operate as a subsidiary of Radian Group. Radian expects to close the deal by summer 2014.
The acquisition will increase Radian’s customer base and will create additional opportunities to serve the entire value chain of the mortgage finance market including securitizations and asset monetization businesses. It is also accretive to offer growth through expansion into residential mortgage market and diversification with new and existing credit services.
Moreover, the deal will improve the financial flexibility to Radian as Clayton will add free cash flow to the Radian Group and give future tax benefit.
In addition, Radian Group Inc (NYSE:RDN) reported its financial results for the first quarter 2014 with net income $203 million or $0.94 per diluted shares and adjusted pre-tax operating income of $91.1 million. As of March 31, 2014, Radian holds $5.5 billion of assets and available holding company liquidity of ~$615 million. Risk to capital ratio for Radian’s Guaranty was 19.2:1.
Radian shares were up as a result of Clayton’s acquisition and expected positive growth in foreseeable years.
