Chase to Acquire American Residential
Chase Manhattan Corp. said Wednesday that it has agreed to buy American Residential Holding Corp., a La Jolla-based mortgage lender, for $348 million in cash.
The purchase will make Chase the nation’s fifth-largest mortgage company, with $11.5 billion in loans.
American Residential, which has 100 branches in 32 states, offers single- and multifamily residential mortgages of $212,000 or less. These mortgages are known as “conforming” because they have characteristics that enable them to be sold to the Federal National Mortgage Assn. and the Federal Home Loan Mortgage Corp., government-sponsored mortgage agencies.
Chase has concentrated on making so-called jumbo mortgages--loans that exceed $212,000. With American Residential, the company will expand its conforming loan business, said Bob Hunter, the head of Chase’s consumer finance division.
The acquisition is Chase’s second major purchase of a mortgage company. Last year it bought Troy & Nickels, a regional firm based in Monroe, La.
Under terms of the agreement with American Residential, a Chase subsidiary will begin within a week a tender offer for all of the firm’s outstanding common stock at $28.25 a share. At least 80% of American Residential’s stock must be tendered for the deal to proceed, Chase said.
The acquisition is the latest in a flurry of takeovers in the mortgage business.
Rising interest rates have pummeled the once-burgeoning business of mortgage refinancing. Many independent mortgage companies have seen business shrink and stock prices fall, making them ripe for takeovers.
Large banks have been scooping them up. Chemical Banking Corp. recently bought New Jersey-based Margaretten Financial Corp. for $330 million, while PNC Bank Corp. agreed to buy the servicing rights to $10 billion in mortgages from Associates Corp. of North America, based in Dallas.
Banks have also been hit by a shrinking number of refinancings, but they control a large share of the new mortgage business and have other businesses contributing to profits.
Chase plans to eliminate virtually all of American Residential’s support divisions because the bank’s Tampa, Fla.-based mortgage subsidiary will handle the servicing and accounting of the firm’s mortgage accounts.
Hunter said the company will continue to be headquartered in La Jolla and will retain its name. American Residential had 2,200 employees. Chase will retain 1,500 involved primarily in sales and may keep more after reviewing staffing needs, Hunter said.