The shareholders of the major brokerage have voted in favour of REA’s proposed acquisition of the company.
Mortgage Choice shareholders have today (10 June) voted in favour of the proposed acquisition of Mortgage Choice by REA Financial Services Holding Co. Pty Ltd, a wholly owned subsidiary of the REA Group.
At the scheme meeting, 98.51 per cent of shareholders voted in favour of the $244 million deal. It had needed a majority of 75 per cent to pass.
Only 0.94 of a percentage point voted against.
Mortgage Choice CEO Susan Mitchell told REB’s sister brand The Adviser: “We are very excited to be joining forces with REA. The logic in bringing our businesses together is compelling, creating a business of scale with a strong human and digital offering. It allows us to assist more customers in a more effective way and accelerate opportunities for our network.”
The scheme of arrangement remains subject to a second court hearing, which will be held on Thursday, 17 June 2021, with Mortgage Choice ceasing to trade as MOC on the ASX on 18 June.
If the court approves the scheme, it is expected that the implementation date will be 1 July 2021. On that date, registered Mortgage Choice shareholders will receive a cash consideration of $1.95 per share.
The deal will see Mortgage Choice become a wholly owned subsidiary of REA, alongside franchise broking group Smartline (also owned by REA’s financial services business), bringing the total number of brokers under the group to 900.
The existing Mortgage Choice directors will resign once complete, and the Mortgage Choice board would be reconstituted in accordance with the instructions of REA.
The new board would then review the business operations and organisational structure to determine how Mortgage Choice’s existing business will be conducted and if any major changes should be made.
Mortgage Choice is expected to operate in its current locations, including its head office and REA has previously said that it intends to “continue the business and strategic direction of Mortgage Choice, including actively pursuing growth opportunities available to Mortgage Choice”.
REA has stated that its overall strategy for its financial services business is focused on “creating compelling property and home loan–led journeys for buyers and refinancers on realestate.com.au and on other relevant channels”.
The financial services business is core to REA’s broader growth strategy, with the Mortgage Choice acquisition helping provide the group with a “compelling opportunity to establish a mortgage broking business with increased scale, and complement the existing Smartline broker footprint, resulting in greater national brokerage coverage”.
Mortgage Choice market cap at $146.0 million
Mortgage Choice directors had unanimously recommended that Mortgage Choice shareholders approve the scheme, and an independent report from Grant Thornton had previously found that the REA Group’s proposed acquisition of the major brokerage was “fair and reasonable”.
In its results for the nine months ended 31 March 2021, the REA Group said that the transaction is expected to be funded by an increase in REA’s syndicated debt facilities.
It said that the existing $170 million syndicated debt facility, which is currently due to expire in December 2021, will be refinanced as part of this transaction process.
Mortgage Choice was founded in 1992 and listed on the ASX in 2004. It provides mortgage broking services through a network of over 380 franchises and over 500 mortgage brokers across Australia, as well as financial planning services, and has over 100 employees.
It reported that for the 12 months to 31 December 2020, it generated settlements of $11.1 billion through its mortgage broking franchise network, while the outstanding balance of loans originated by its loan book was $54.1 billion.
As at 26 March — which was the last trading day before the announcement of the proposed acquisition by the REA Group — the major brokerage had a market capitalisation of around $146.0 million, based on a closing price of almost $1.18 per share.
The scheme consideration of $1.95 per share therefore represents a 66 per cent premium on this last closing price.