In a move to further its web strategy, financial software and services company Intuit Inc said Thursday it will acquire Bingham Farms, Michigan-based Rock Financial Corp, which provides online consumer mortgages through the RockLoans.com web site. Mountain View, California-based Intuit has agreed to pay roughly $370m in stock in exchange for all of the outstanding shares and options of Rock.
Intuit said the acquisition, when combined with its existing QuickenMortgage service, will create a national online mortgage powerhouse that offers home mortgages on the internet to customers in all 50 states. Together, Intuit and Rock claim to have originated nearly $3.5bn in closed mortgage loans in the past 12 months. Customers will also continue to have the ability to compare and apply for mortgages from many lenders on the QuickenMortgage site, Intuit said.
Under the terms of the agreement, the actual number of Intuit shares to be exchanged for each Rock share will be determined by dividing $23 by Intuit’s 20-trading-day average price prior to closing, but will not be less than 0.58 shares or more than 0.84 shares. Intuit shares fell $3 to close at $27 after the announcement Thursday, while Rock shares were unchanged at $20.
In a related transaction, Intuit said it will also acquire Title Source Inc for $6m in stock, with the exchange ratio to be calculated in the same manner as the Rock acquisition. Title Source provides title insurance and escrow services to real estate agents, lenders, corporations and homeowners. The deal is intended to enable Intuit to streamline portions of the mortgage process.
To cover the two acquisitions, Intuit will issue roughly 12 million shares of stock, which the company warns will dilute its annual reported earnings per share by about $0.03. Both acquisitions will be accounted for as a pooling of interests. The additional operating expenses to be incurred after the deals close – expected by the end of December – will likely be offset by cost controls in other areas of the business, Intuit said.
Daniel Gilbert, chairman and CEO of Rock, will become CEO of QuickenMortgage, reporting to Mark Goines, senior vice president of Intuit’s consumer division. Rock’s board is recommending that shareholders vote in favor of the acquisition but Gilbert, who controls more than 60% of the voting interest of Rock, has already agreed to vote for the deal. Rock’s operations will continue to be based in Michigan.
