Pontiac's United Wholesale Mortgage to go public with Gores Group
Pontiac-based United Shore Financial Services' wholesale mortgage business will go public on the Nasdaq in a $16-billion-plus transaction with the help of the brother of Detroit Pistons owner Tom Gores, the company said Wednesday.
Gores Holdings IV Inc., a blank-check company sponsored by Alec Gores' global investment firm, will combine with the country's largest wholesale mortgage company led by former Michigan State University basketball player Mat Ishbia. The deal that is expected to close late this year will provide the company with $925 million in new capital to invest in new technology and continue growing at the rate it has, Ishbia told The Detroit News.
"We just don’t have the same access to resources as our biggest competitors have, whether it’s Rocket, Wells, Chase," he said. "We think that in order to continue our growth plan as we have another record year, here is the ability to have access to these resources and really grow the business to a whole other level."
The Wall Street Journal first reported the news. A blank-check or special-purpose acquisition company raises money through the stock market to buy or merge with other businesses. The Gores affiliate's initial public offering on the Nasdaq was in January and raised $425 million. But news of the transaction was not well-received: Shares were closed down 3.3% Wednesday.
Exploring how to go public has been in the works for about a year, said Ishbia, who met Gores in the spring. Ishbia liked the special-purpose acquisition route over an initial public offering in how it provides greater certainty on pricing and valuation.
Gores is "the godfather of SPACs," Ishbia said. "We wanted to partner with the right person to ride shotgun with us. There's nobody better in the country at this."
Founded in 1987, Gores Groups LLC has done five other similar transactions, including with Hostess Brands in 2016. Gores was just as complimentary of Ishbia, saying he admired his track record as CEO and his aggressiveness: "Mat is one of the best CEOs I have ever met, and I have met a lot of CEOs."
United Wholesale Mortgage focuses exclusively on the wholesale mortgage market where homebuyers and homeowners looking to refinance work with independent mortgage brokers to find the best interest rates. That differs from rivals like Detroit-based Rocket Co.'s Quicken Loans whose business consists mostly of direct-to-consumer sales.
Rocket went public with a traditional initial public offering on the New York Stock Exchange last month. Although it decreased its initial offering price a few dollars to $18, its stock is trading at about 12% above that. Rocket raised $1.8 billion with its IPO and is now valued at almost $41 billion.
The wholesale market is better for consumers who can get a better interest rate and is cheaper for lenders, Ishbia said. There also is plenty of room for growth: The wholesale market represents about 20% of the overall industry, a decrease from the 35% or more it included prior to the housing market crash in 2008, he said.
UWM represents 33% of the segment and roughly 6.5% of the industry overall by leveraging its proprietary platform called Blink to make the mortgage process efficient, Ishbia said. The company is predicting to close a record $200 billion in mortgage volume with $2.9 billion in pre-tax earnings amid a low-interest-rate environment. In 2019, loan volume totaled $107.7 billion.
Ishbia's father, Jeffrey, founded Shore Mortgage in 1986. Ishbia took over the company in 2013, and it has experienced significant growth. Moving its headquarters and 2,700 employees from Troy in 2018, UWM already has had to expand its new building in Pontiac and now employs almost 7,000 people — 2,000 of whom have been added in the past three months with more to come.
"There is massive demand to work with us," Ishbia said, adding the company can close mortgages in just 17 days. "We need more people to handle mortgages in that time frame."
The deal would leave United Shores' owners — consisting mostly of Ishbia, his father and brother — with a 94% stake in the new company whose $16.1 billion equity value will make it the largest combination of a special-purpose acquisition company to date, the companies said in a news release. UWM Corp. will trade under the "UWMC" ticker symbol. Employees also will be able to take part in the company's ownership.
In addition to the $425 million already raised, a private placement of $500 million led by Gores and other big institutional investors will infuse the company with the capital it says it needs.
"We will continue to run the business exactly how we have been running the business," Ishbia said, "just with more fuel on the fire with access to the capital markets to really take this to a whole other level."