Mr. Cooper to Be Acquired by Rocket Companies in a $9.4B Deal

Mr. Cooper Group Inc. COOP and Rocket Companies, Inc. RKT have jointly announced an agreement under which the former will be acquired by the latter in an all-stock deal valued at $9.4 billion. This will create a mortgage behemoth in the United States, with the combined firm servicing $2.1 trillion of loans and 9.5 million clients. 

Under the terms of the agreement, COOP shareholders will get 11 RKT shares for each Mr. Cooper share. The transaction is expected to drive higher loan volume and long-term client relationships, thus providing greater recurring revenue and lowering client acquisition costs. 

Following the announcement, shares of COOP soared 14.5%, while RKT slid 7.4% during yesterday’s trading. 

Jay Bray, COOP Chairman and CEO, 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.” Further, in connection with the closure of the transaction, COOP will announce and pay a dividend of $2.00 per share. 

Varun Krishna, RKT CEO, said, “Servicing is a critical pillar of homeownership – alongside home search and mortgage origination. With the right data and AI infrastructure we will deliver the right products at the right time.” Last month, Rocket Companies announced a deal to acquire real estate brokerage Redfin Corp. RDFN for $1.75 billion. By merging RDFN's home search and agent network with RKT's mortgage services, the company intends to offer a seamless experience from search to closing and beyond.

Additional Details on the COOP-RKT Deal

Rocket Companies’ acquisition of Mr. Cooper will expand its homeownership platform significantly. This will strengthen its position as a leading mortgage servicer and originator. By leveraging its larger servicing portfolio, the company aims to maintain its industry-leading recapture rate of 83%, which is three times the industry average.

The acquisition will also enhance RKT’s data capabilities, adding nearly 7 million new clients and 150 million annual customer interactions. This expanded dataset will improve automation, personalization and overall operational efficiency. Moreover, the combined entity will benefit from a more balanced business model, allowing it to generate stable earnings across various interest rate environments. With high-margin recapture opportunities, the servicing portfolio is expected to continue producing significant revenues, having generated $4 billion in servicing fees last year.

Rocket anticipates substantial financial benefits from the transaction, including $100 million in additional pre-tax revenue from improved recapture rates and integrating its title, closing and appraisal services with Mr. Cooper’s operations. Further, the company expects $400 million in pre-tax cost savings by streamlining operations and reducing corporate expenses. 

These synergies will support earnings growth, making the acquisition immediately accretive to RKT’s adjusted earnings per share upon closing (expected to occur in the fourth quarter of 2025). The deal, still subject to COOP shareholder and regulatory approvals, is expected to result in $400-$500 million of acquisition-related charges. 

Upon the closure of the deal, the combined company's board will consist of 11 members, with nine from RKT and two from Mr. Cooper.

Our Take on the COOP-RKT Transaction

The U.S. housing market has faced significant challenges in recent years, with soaring interest rates and high home prices pushing many potential buyers to the sidelines. In fact, sales of previously owned homes dropped to their lowest level since 1995 last year. However, with mortgage rates now easing from their peaks, the upcoming spring buying season could see a rebound in demand.

Hence, the acquisition of Mr. Cooper by RKT can be seen as a game changer for the long-term prospects. 

So far this year, shares of COOP and Rocket Companies have rallied 24.6% and 7.2%, respectively.
 

At present, Mr. Cooper and RKT carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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