Rocket Cos. is set to buy Redfin Corp. in a deal that values the real estate listing site at $1.75 billion, according to Bloomberg in a Monday report.
The Detroit-based financial technology group will pay $12.50 for every Redfin share in an all-stock transaction, according to a statement. This price represents a premium of 63% over the volume weighted average price of Redfin’s common stock for the 30 days through Friday.
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Shares in Redfin rose as much as 80% on Monday for their biggest intraday gain on record. The stock was up 75% to $10.20 at 10:09 a.m. in New York, giving the company a market value of $1.3 billion. Rocket was down 11% for a market capitalization of about $28 billion.
While Rocket is a mortgage, real estate and personal finance business, Redfin operates a home search platform with more than one million for-sale and rental listings along with a tech-powered brokerage of more than 2,200 agents.
Redfin CEO Glenn Kelman is expected to continue leading the business, while reporting to Rocket’s CEO Varun Krishna. Krishna said in an interview that more homes are selling for at or below their listing prices and that inventory is staying on the market for longer. “You’ve seen a little bit of relief with mortgage rates as well,” Krishna said. “So we look at these as good indicators.”
He also added, “Models from Redfin can augment models from Rocket and help us understand how and when a consumer is in a good place where their intent and their seriousness to buy a home increases.”
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Rocket expects it would achieve more than $200 million in run-rate synergies by 2027 through the purchase of Redfin. The company also said it’s betting on technology, specifically artificial intelligence (AI), to fuel a rebound after a drop-off in mortgage origination.
“This is really about accelerating our purchase and our AI strategy,” Krishna said, about the deal. “It allows us to integrate home search with the Rocket platform, which obviously covers things like financing, title, servicing, closing.”
While Morgan Stanley is advising Rocket on the deal, Redfin is working with Goldman Sachs.