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Press release from Marketwire

Davis + Henderson Agrees to Acquire Mortgagebot LLC, America's Leading Web-Based Mortgage Technology Provider for US $231.8 Million

Thursday, March 24, 2011

Davis + Henderson Agrees to Acquire Mortgagebot LLC, America's Leading Web-Based Mortgage Technology Provider for US $231.8 Million15:37 EDT Thursday, March 24, 2011TORONTO, ONTARIO--(Marketwire - March 24, 2011) -NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATESDavis + Henderson Corporation ("D+H") (TSX:DH) today announced that it has entered into an agreement to acquire Mortgagebot LLC ("Mortgagebot") of Mequon, Wisconsin (the "Acquisition") for a purchase price of US $231.8 million, payable in cash. The Acquisition is expected to close on or about April 12, 2011, subject to satisfaction of customary closing conditions. Strategic RationaleMortgagebot is the leading provider of web-based mortgage point-of-sale solutions in the United States. Founded in 1997, Mortgagebot provides a range of consumer direct, loan officer and branch and call centre mortgage origination solutions for nearly 1,000 banks and credit unions. Mortgagebot has been consistently recognized by leading US publications and industry analysts for its growth and leadership of online lending services technology. Its PowerSite platform was branded "the de facto origination tool" by Cornerstone Advisors. "By acquiring Mortgagebot, D+H further advances our strategic diversification agenda, we extend the range of integrated solutions we offer within the financial services marketplace, and we add an important dimension to our capabilities in a core lending services area", said Bob Cronin, CEO of D+H. "As a proven business with a track record of innovation and growth, Mortgagebot gives us a solid position with a large number of new customers within the US financial services marketplace. We are very pleased that Scott Happ, Mortgagebot's founder, President and CEO, and his team will be joining us to execute our shared growth plans."Financial BenefitsMortgagebot is a profitable, privately-held business with 2010 revenues of $37.7 million and normalized EBITDA¹ of $20.2 million, both translated into Canadian dollars and determined under US GAAP. Mortgagebot is expected to deliver positive cash flow that supports dividends at current levels and provide modest accretion to adjusted earnings1 for D+H shareholders in the latter part of 2012. With the acquisitions of Mortgagebot, and Asset Inc. earlier this year, the services and revenues of the combined business will continue to expand and become more diversified. On a pro forma basis, revenues from services to the lending market will comprise approximately 54% of D+H's revenue, with programs to the chequing account representing approximately 40%. Over the past five years, D+H has completed several acquisitions that have supported this substantial evolution of the business.Growth Plan"Mortgagebot has experienced solid growth by capitalizing on its many strengths - including its leading market share and reputation, strong customer service ethic, and innovative technology – which combine to create strong value to customers", said Gerrard Schmid, President and COO of D+H. "The current adoption rate among U.S. financial institutions for consumer-directed online mortgage origination is estimated to be about 20% and growing. As a market leader, Mortgagebot is positioned well to participate in this growing target market. Today Mortgagebot meets the needs of a range of financial institutions, from large 1200+ branch banks through to small community banks and credit unions. On a business as usual basis going forward, we will continue to build on Mortgagebot's leadership position in online mortgage origination."StrengthsMortgagebot revenues are principally derived from long term contracted subscription fees, which represented approximately 73% of 2010 revenues, with variable transaction fees making up the largest component of the balance. With customers typically served under long-term contracts, the operating and business model has proven to be solid, allowing Mortgagebot to grow both revenues and profits through the difficult markets of the past two years. "Since our founding, we have achieved growth within a variety of market conditions," said Scott Happ, founder, President and CEO of Mortgagebot. "In fact, our annual revenue growth has averaged 13% over the past four years by helping our customers take advantage of the growth and cost savings associated with online mortgage originations. We believe that by being part of D+H, we can bring the benefits of our technology and expertise to an even larger segment of the US and Canadian financial services marketplace."Acquisition FinancingThe US$231.8 million purchase price, and transaction expenses, will be funded through the issuance of $121.8 million of new equity (the "Offering") and $115 million of new borrowings. To support the Offering, today D+H entered into an agreement with a syndicate of underwriters, co-led by TD Securities and RBC Capital Markets, under which the underwriters have agreed to buy 6,000,000 subscription receipts ("Subscription Receipts") for sale to the public at a price of $20.30 per Subscription Receipt for gross proceeds of $121,800,000. Each Subscription Receipt represents the right to receive one common share of D+H for no additional consideration on the closing of the acquisition of Mortgagebot. The proceeds from the offering of Subscription Receipts will be deposited in escrow pending closing of the acquisition. If the acquisition closes on or before May 31, 2011, the gross proceeds from the offering of subscription receipts will be released to D+H and used by it to pay a portion of the purchase price of the acquisition. If the acquisition fails to close by May 31, 2011, or the acquisition is terminated at an earlier time, the escrow agent will return the gross proceeds and pro rata entitlement to interest thereon to holders of the Subscription Receipts.Completion of the Offering is subject to certain conditions including normal regulatory and stock exchange approvals. The Subscription Receipts will be offered in all provinces of Canada by way of a short form prospectus. The closing of the Offering is expected to occur on or about April 12, 2011. Additionally, D+H has received a commitment from its existing lending syndicate to make available an additional credit facility of $100 million, thereby providing additional borrowing capacity in support of the Acquisition. Along with these commitments, the Corporation's lenders have agreed to extend the maturity date of the bank borrowings to April 2016 from June 2013. D+H expects to issue an additional bond in the amount of US$63 million, which will comprise part of the $115 million of new borrowings described above, with a ten year maturity date, to one of its existing bond lenders. The securities offered pursuant to the Offering have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registrations requirements of such Act. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction.Conference CallDavis + Henderson will discuss the acquisition of Mortgagebot LLC, via conference call at 4:30 p.m. EST (Toronto time) on March 24, 2011. The number to use for this call is 647-427-7450 for local/international callers or 1-888-231-8191 for all other callers. The conference call will be hosted by Bob Cronin, Chief Executive Officer, Gerrard Schmid, Chief Operating Officer and by Brian Kyle, Chief Financial Officer. The conference call will also be available on the web by accessing CNW Group's website www.newswire.ca/webcast/. For anyone unable to listen to the scheduled call, the rebroadcast number will be: 416-849-0833 for Toronto area callers, or 1-800-642-1687 for all other callers, with Encore Password 55062348. The rebroadcast will be available until April 7, 2011. An archive recording of the conference call will also be available at the above noted web address for one month following the call and a text version of the call will be available at www.dhltd.com.Notes:1 EBITDA and Adjusted earnings are non-IFRS measures, which are not defined terms under International Financial Reporting Standards ("IFRS"). EBITDA is calculated as net income before interest, taxes, depreciation and amortization. The normalized EBITDA of Mortgagebot in 2010 was $20.2 million and was calculated after removing $1.1 million of non-recurring items. Adjusted earnings is calculated as net income before certain non-cash items such as amortization of intangibles and gain or losses on interest rate hedges as well as certain cash items non-regularly recurring such as restructuring or acquisition expenses, as they are not considered indicative of the financial performance of D+H for the period being reviewed. These non-IFRS financial measures are derived from and should be read in conjunction with the Consolidated Statements of Income and the Consolidated Statements of Cash Flow. Management believes these supplementary disclosures provide useful additional information related to the operating results of D+H. Investors are cautioned that these measures should not be construed as an alternative to using net income as a measure of profitability or as an alternative to the Consolidated Statements of Income or other IFRS statements. D+H's method of calculating these balances may not be comparable to calculations used by other companies bearing the same description. About D+H D+H is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts, and personal, commercial, and other lending and leasing products. For more information about D+H visit www.dhltd.com. About Mortgagebot Mortgagebot (www.mortgagebot.com) provides financial institutions with innovative point-of-sale solutions for mortgage lending. The company's industry leading and award winning PowerSite family of solutions enables mortgage lenders to originate mortgage loan applications directly over the Internet, through branch or call centre personnel, or with professional loan officers. Mortgagebot blends extensive mortgage experience with leading-edge SaaS technology to create scaleable and affordable online solutions for nearly 1000 mortgage lenders in the United States. Prior to the Acquisition, Mortgagebot was majority owned by Spectrum Equity Investors.Caution Concerning Forward-Looking Statements From time to time D+H makes written and oral statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning D+H's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of D+H are forward-looking statements. The words "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would" and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of D+H and Mortgagebot to meet their revenue and EBITDA targets; general industry and economic conditions; changes in D+H's relationship with its customers and suppliers; pricing pressures and other competitive factors; the accretion to adjusted earnings; business; the ability to achieve cost synergies. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While D+H considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in D+H's industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements relate to, among other things, challenges presented by declines in the use of cheques by consumers; the Company's dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Company's financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws. Other Risk Factors are set out and described in the Annual Information Form and other public filings for Davis + Henderson Corporation which is available at www.sedar.com or its web site at www.dhltd.com.FOR FURTHER INFORMATION PLEASE CONTACT: Marianne GobeilD+H contact:(416) 340-2500 Ext. 2 or 1-800-515-3503mgobeil@leadingcommunicators.comORCindy GolischMortgagebot contact:(480) 471-8820 or (480) 529-2450cindy.golisch@prunlimited.com