Computershare to sell US mortgages unit for $1.13bn

The business was impacted by US homeowners struggling with financial hardship.

The sale of CLS will result in a one-off statutory pre-tax loss of approximately $US150m to $US180m.

ASX-listed financial administration outfit Computershare has landed a deal to sell its US mortgage service unit to Rithm Capital Group for an estimated $US720m ($1.13bn), as it narrows its focus to core business.

Computershare chief executive and president Stuart Irving told investors on Tuesday that a review found “a full divestment of the business via a competitive process would be in the best interests of shareholders”.

The sale of CLS will result in a one-off statutory pre-tax loss of approximately $US150m to $US180m, but the impairment will not affect underlying cashflow, Computershare said.

The business was had suffered by US homeowners struggling with financial hardship amid the Covid pandemic, Mr Irving said, leading to a review and the decision to ultimately offload it.

A review of Computershare’s UK mortgage services business is still ongoing.

Shares in Computershare jumped as much as 3.3 per cent to $26.66 – its highest point since December 2022 – before settling to $26.02 at 3pm AEDT, up 0.8 per cent.

“First, it represents an important milestone in executing Computershare’s simplification strategy and drive to increase the quality and consistency of earnings,” Mr Irving said on a conference call.

Computershare chief executive Stuart Irving. Picture: Supplied

“Over the past three years or so the US Mortgage business has underperformed against group margin and ROIC (return on invested capital) targets. We know it is more capital intensive compared to our core business and has high levels of regulatory risk. It’s also had periods where it was impacted by a number of things outside our control, ‘a bit too macro’ as I say.

“We determined that 2023 was a good timing window to sell the business to an operator with an appetite to deploy capital into the business, allowing it to continue to grow. We are delighted to sell to Rithm who will provide capital, grow the book and enjoy the synergies of being vertically integrated with a large origination engine.”

The Washington DC-based Rithm, which has a portfolio of companies across the financial services and real estate sectors, will fund the acquisition through a combination of existing cash, available liquidity along with additional mortgage servicing rights financing. The deal includes the sale of Specialised Loan Servicing (SLS), which Rithm will transition to one of its portfolio companies, Newrez.

“We are thrilled to welcome SLS to the Newrez family. Our track record of acquisitions in the mortgage servicing space continues to deliver value not only for our shareholders, but also for the millions of consumers we serve,” Rithm CEO and chairman Michael Nierenberg said.

Mr Irving added that the divestment would allow Computershare to better focus efforts on its core businesses.

“Today’s announcement represents an important milestone in executing Computershare’s simplification strategy and drive to increase the quality and consistency of earnings,” he said.

“The proceeds from the sale will enhance Computershare’s flexibility to pursue strategic investments and consider further capital management opportunities.

“We thank the management and employees of the business for their hard work and successes along the way and wish them the very best for their next chapter.”