Redfin to buy a Bay Area mortgage lender. This is a “positive step”, say analysts.

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A Redfin real estate yard sign.

Stephen Brashear / Getty Images for Redfin

Actions of

Red tuna

were up on Wednesday as investors rallied around news the online real estate brokerage firm would acquire mortgage lender Bay Equity Home Loans.

Redfin (ticker: RDFN) will buy Bay Equity for $ 135 million in cash and stocks. The price represents a premium of $ 72.5 million over Bay Equity’s estimated book value as of December 31, 2021.

Founded in 2007, Bay Equity is an approved mortgage lender in 42 states, helping accelerate Redfin’s strategy to be a one-stop-shop for brokerage, lending and other services, Redfin said in a statement.

“With Bay Equity’s geographic presence and full product line, we will be able to immediately offer mortgages to a greater portion of Redfin’s homebuying clients,” said Adam Wiener, President of Operations real estate agencies from Redfin.

Analysts have reacted positively to Redfin’s announcement.

“We see the acquisition as a positive step to increase Redfin’s mortgage capacity which was headwind in 2021, and which brings Redfin closer to developing a comprehensive end-to-end residential real estate product offering,” wrote Ygal Arounian , analyst at Wedbush.

Redfin had struggled to develop its mortgage capacity throughout 2021, but the acquisition of Bay Equity will significantly increase that capacity, providing 1,200 additional employees and a full range of products, Arounian said. The analyst reiterated an outperformance rating on the stock, but lowered its price target to $ 44 from $ 68 due to lower ratings among its peer groups in the current market environment.

Redfin expects the deal to close in the second quarter and have a positive impact on earnings per share this year. The stock rose 1.5% to $ 34.73 on Wednesday. It has fallen by around 9% this year.

Write to Sabrina Escobar at [email protected]

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