Home Point Financial to Acquire Stonegate Mortgage Corporation

January 27, 2017

Home Point Financial Corporation (“Home Point”) and Stonegate Mortgage Corporation (SGM) (“Stonegate Mortgage”) today announced that they have entered into a definitive agreement for Home Point to acquire Stonegate Mortgage in an all-cash transaction valued at approximately $211 million. On a pro forma basis, the acquisition would position Home Point as a top-25 mortgage originator and servicer.Under the terms of the agreement, Stonegate Mortgage’s stockholders will receive $8.00 per share. The per share price represents a premium of approximately 61 percent over Stonegate Mortgage’s 90-day volume weighted average price on January 26, 2017, and a 34 percent premium over Stonegate Mortgage’s closing price per share on January 26, 2017.

“We are very excited about the opportunity to work together with the Stonegate Mortgage team to accelerate the build out of Home Point Financial,” said Willie Newman, Home Point’s Chief Executive Officer. “The combined business will have full national coverage across all channels of mortgage origination, as well as vertical integration across the mortgage value chain. Most important, the talent and experience of the combined team will give us the ability to fulfill Home Point’s vision of being a leader in mortgage banking and financial services.”
Jim Smith, Chief Executive Officer of Stonegate Mortgage, commented, “The combination of Stonegate Mortgage and Home Point Financial creates an exciting opportunity for our company, our associates and our customers. We look forward to joining forces with the Home Point Financial team and building a best in class mortgage origination and servicing platform focused on delivering value to our customers.”

Additional Transaction Details
Stonegate Mortgage’s board of directors unanimously approved the transaction following a comprehensive review of the transaction and strategic alternatives. The transaction is subject to certain customary closing conditions, including, among other things, approval by Stonegate Mortgage’s stockholders and regulatory approvals. The transaction is expected to close by the end of the second quarter of 2017.
Certain stockholders, directors and executive officers of Stonegate Mortgage with the power to vote approximately 36 percent of Stonegate Mortgage’s outstanding common stock have entered into voting and support agreements with Home Point to vote in favor of, and otherwise support, the transaction.
Houlihan Lokey acted as financial advisor to Home Point, and Kirkland & Ellis LLP acted as legal counsel to Home Point.
Barclays and FBR Capital Markets & Co. acted as financial advisors to Stonegate Mortgage, and Sullivan & Cromwell LLP acted as legal counsel to Stonegate Mortgage.

Tax Asset Protection Plan
In connection with the transaction, Stonegate Mortgage additionally announced today that its Board of Directors has adopted a Tax Asset Protection Plan (the “Plan”), which is designed to protect Stonegate Mortgage’s tax assets during the period prior to the closing of the proposed merger between Stonegate Mortgage and Home Point (the “Proposed Merger”). This Plan is similar to tax benefit protection plans adopted by other public companies with significant tax attributes. As of September 30, 2016, Stonegate Mortgage had U.S. federal net operating loss carryforwards of approximately $163.5 million.
Home Point’s ability to use the tax attributes of Stonegate Mortgage may be significantly limited if there were an “ownership change” (as defined under Section 382 of the Internal Revenue Code) prior to the closing of the Proposed Merger. In general, an ownership change occurs if there is a cumulative change in the ownership of Stonegate Mortgage by “5 percent stockholders” that exceeds 50 percentage points over a rolling three-year period.

As part of the Plan, the Stonegate Mortgage Board of Directors today declared a dividend of one preferred share purchase right for each outstanding share of Stonegate Mortgage’s common stock. The rights will be distributable to stockholders of record as of February 6, 2017, as well as to holders of Stonegate Mortgage’s common stock issued after that date.