Computershare offloads US mortgages unit for $1.13b

afr.com:

Computershare, the provider of share registry and employee share plan services, is selling its troublesome mortgage services business in the US to asset manager Rithm Capital for $US720 million ($1.13 billion).

The sale of CLS comes just after the business returned to profitability in the six months ended June 30 in a highly competitive market where it had suffered from lower refinancing volumes and weaker mortgage originations.

Computershare said on Tuesday the sale of CLS to Rithm would result in a one-off, statutory pre-tax loss on the sale of between $US150 million to $US180 million. The impairment will not affect its underlying cash flow.

The US home mortgage servicing market has proven to be a tough sector for Computershare.  

Computershare gained 0.7 per cent in early trade to $26. Shares have risen by about 27 per cent since late March when it was trading at $20.52.

Computershare CEO Stuart Irving said Rithm had the capital to be able to expand the business, and it should be a smooth transition.

“Rithm has strong mortgage industry credentials and the ability to bring capital to scale the business further,” Mr Irving said.

Mr Irving said the sale was part of a simplification strategy where Computershare would put more investment into its core businesses of managing share registries, employee share plans and corporate trusts. “The divestment of [CLS] allows us to focus our efforts on our core businesses which have high levels of recurring revenues, long-term growth runways, low capital intensity and attractive returns through the cycle,” he said.

Rithm chief executive Michael Nierenberg said his company had a strong track record of adding value from acquisitions. “Our track record of acquisitions in the mortgage