Rocket Companies announced a $9.4 billion all-stock acquisition agreement with mortgage servicer Mr. Cooper Group Inc. that leaders of both companies say will generate more revenue opportunities, as well as value and cost savings for their clients.
Combined with the recent addition of Redfin, Rocket will now be able to “own the client experience from beginning to its true end,” Rocket CEO Varun Krishna said in a conference call on March 31.
The transaction is based on an 11.0x exchange ratio. The transaction was unanimously approved by the boards of directors of both Rocket and Mr. Cooper. It is expected to close in the fourth quarter, subject to approval of Mr. Cooper shareholders and the satisfaction of other regulatory closing conditions.
With this acquisition, Rocket will bring its mortgage recapture capabilities to a combined servicing book of $2.1 trillion across nearly 10 million clients, representing one in every six mortgages in America, according to a release.
Krishna added that clients are “the biggest winner” in this new combined business operation.
“Our platform is vertically integrated, designed with the singular objective to make their experience modern, easy and more affordable,” Krishna said.
The leader of Mr. Cooper explained how working with Rocket will be helpful to consumers.
“Mr. Cooper has been on a journey to transform the homeownership experience, and we have built the most advanced servicing platform in the mortgage industry,” Mr. Cooper Group Chairman and CEO Jay Bray said. “By combining Mr. Cooper and Rocket, we will form the strongest mortgage company in the industry, offering an end-to-end homeownership experience backed by leading technology and grounded in customer care. I am deeply grateful for the dedication of the Mr. Cooper team and look forward to our continued work as we lead our industry into the future of homeownership.”
The acquisition of Mr. Cooper will allow Rocket to bring together the homeownership experience at scale and accelerate its artificial intelligence (AI)-powered platform, according to Rocket.
“Servicing is a critical pillar of homeownership – alongside home search and mortgage origination,” Krishna said. “With the right data and AI infrastructure we will deliver the right products at the right time. That’s how we build lifelong relationships, by proactively unlocking benefits and meeting needs before they arise. We look forward to welcoming Mr. Cooper’s nearly seven million clients.”
Upon closing of the transaction, it is expected Bray will become president and CEO of Rocket Mortgage, reporting to Krishna. Dan Gilbert will remain chairman.
In its announcement, Rocket listed the benefits of its combined venture with Mr. Cooper:
- Scaled homeownership platform: Rocket’s combined servicing portfolio will exceed $2.1 trillion in unpaid principal balance – or one in every six mortgages in America.
In the conference call Bray noted Mr. Cooper offers a servicing platform that is “digital, efficient, and scalable.”
“By combining this platform with Rocket’s iconic brand and marketing capabilities, we’re creating a fully integrated homeownership platform with unmatched capabilities,” he said.
- Accelerate origination-servicing recapture flywheel: Rocket Mortgage has ranked No. 1 in J.D. Power’s mortgage servicer study for 10 years and No. 1 in mortgage origination 12 times, driving the company’s 83 percent recapture rate. With a larger servicing portfolio, Rocket leaders said they are poised to sustain their industry-leading retention and recapture rates.
“Recapture is the engine that connects origination and servicing,” Krishna said in the conference call. “Simply put, recapturing more clients compounds growth and drives long-term value.”
In the conference call, Krishna noted Rocket’s recapture rate is three times higher than average because “we are relentlessly obsessed with delighting our clients. And when we take our recapture rate and apply it to Mr. Cooper's scale and operational excellence, we activate the best of both worlds.”
- Increases data set to improve automation, personalization and efficiency: Following the acquisition of Mr. Cooper, Rocket will gain understanding of nearly seven million additional clients and 150 million annual customer interactions.
Krishna said both Rocket and Mr. Cooper have “heavily invested” in technology.
“When you combine those capabilities together, you get something transformational: the ability to anticipate client needs before they voice them,” Krishna explained. “We’re not waiting for clients to raise their hand. Our data signals tell us when it’s time to reach out, engage, and guide — even before a home search begins.”
- Enhanced earnings growth opportunity across all interest rate market environments: The combined company will attain a balanced business model and maintain stability in all market environments. Rocket will drive earnings growth from high-margin recapture opportunities on the combined servicing portfolio, which together generated $4 billion of servicing fee revenue in 2024.
- Substantial revenue and cost synergies: The transaction is expected to generate $100 million in additional pre-tax revenue from higher recapture rates and attaching Rocket’s title, closing and appraisal services to Mr. Cooper’s existing originations. Rocket projects $400 million in pre-tax cost savings from streamlining operations, corporate expense and technology investments.
- Impact on earnings: The transaction is expected to be accretive to Rocket’s adjusted earnings per share immediately after closing.
Krishna said the acquisition of Mr. Cooper will generate a framework that will benefit clients, real estate professionals and both companies.
“High-intent clients get value and seamless experiences. Industry professionals like real estate agents, loans officers and mortgage brokers get powerful AI tools to grow their business,” Krishna said. “Partners gain enterprise-level capabilities. It’s a model where everyone succeeds together.”
Upon closing, the board of the combined company will consist of 11 members, nine of whom will be from the board of Rocket and two of whom will be from Mr. Cooper’s board.
Under the terms of the agreement, Mr. Cooper shareholders will receive a fixed exchange ratio of 11.0 Rocket shares for each share of Mr. Cooper common stock. This represents a $143.33 per share value based on the closing price as of March 28, and a premium of 35 percent over the volume weighted average price (VWAP) of Mr. Cooper’s common stock for the 30 days ending March 28.
Upon completion of the transaction, Rocket shareholders will own approximately 75 percent of the combined company on a fully diluted basis pro forma for the Redfin transaction, while Mr. Cooper shareholders will own approximately 25 percent. The all-stock transaction is intended to be tax-free to Mr. Cooper shareholders.
In connection with the completion of the transaction, Mr. Cooper will declare and pay a dividend of $2 per share of Mr. Cooper common stock.