Ocwen Financial Corp. (OCN) Up After Affiliate Cancels Proposed Merger
Shares of Atlanta, Georgia, based Ocwen Financial Corp. (OCN) rose on Tuesday, against the backdrop of a largely flat day on Wall Street. Ocwen's stock was up $0.93 per share, rising 11.16% to close at 9.26, on volume of 7,285,765 shares. The stock rose on news that Ocwen's affiliate, Home Loan Servicing Solutions, Ltd. announced that it's proposed merger with New Residential Investment Corp (NRZ) has been canceled.
The cancellation of the merger agreement between Ocwen affiliate Home Loan Servicing Solutions, Ltd. (HLSS) and New Residential sent Ocwen shares higher since it represents an alternate arrangement which is seen as more beneficial to Ocwen. In place of the merger, New Residential will instead acquire most of Home Loan's assets for a lower price. New Residential has also agreed to a multi-year extension of it's service contracts with Ocwen.
New Residential is a real estate investment trust (REIT) that focuses on investments in mortgage servicing related assets and other related opportunistic investments. Under the new agreement - an asset purchase rather than a merger - between New Residential and Home Loan, New Residential will acquire "substantially all of Home Loan's assets and liabilities. The asset purchase ends the merger agreement between the two companies that was announced on February 22 of this year. The new agreement provides for a long-term partnership between New Residential and Ocwen.
Under the Asset Purchase Agreement, New Residential paid HLSS an equity purchase price of approximately $1.2 billion, or $17.08 per HLSS share on 71 million HLSS shares. With adjustments for cash and the repayment of HLSS debt, New Residential paid HLSS a total purchase price of approximately $1.4 billion, comprised of approximately $1 billion of cash and 28.2 million newly issued shares of New Residential.
The recent increase in Ocwen's share price has come as welcome relief to the company's shareholders. Ocwen's stock has been highly volatile in recent years. The stock traded as high as $55 per share early in 2014, but fell below $6 per share in late January of this year.
"We are very pleased to have established a new partnership with New Residential, said Michael Bourque, Chief Financial Officer of Ocwen . "Our entry into a relationship with New Residential, which includes an extension of our servicing contracts, will not only help to secure the financing of Ocwen's servicing business but also provide additional stability to the mortgage servicing industry. We look forward to a growing and productive relationship with our new financing partner.
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