Irvine-based New Century Financial Corp. said Friday it plans to buy Royal Bank of Canada’s U.S.-based RBC Mortgage Co. in a bid to expand beyond subprime lending.
Terms weren’t disclosed. New Century said the acquisition represents less than 4% of its total market capitalization, which is about $2.8 billion.
Subprime lenders make loans to people with imperfect credit.
New Century has done a small amount of traditional lending in the past, though it’s never been a focus. With the RBC deal, New Century is set to do a broader range of lending, including more prime mortgages, or loans to those with strong credit.
“This purchase will extend our nationwide reach by approximately 135 branches and establishes us as a leader in the retail origination channel,”said Brad Morrice, chief operating officer of New Century.
The company makes loans via its subsidiaries, New Century Mortgage Corp. and Home123 Corp., its retail arm. New Century said it wants to become one of the top 10 mortgage originators in the nation.
The deal should be completed in the third quarter, pending regulatory approval, the company said. Jonathan Threadgill, chief executive of RBC Mortgage, is set to join New Century when the deal closes.
New Century became a real estate investment trust last year, and said the acquisition will help it provide steady income to shareholders.
The deal comes at a time when New Century has taken some heavy criticism from its largest shareholder, Greenlight Capital Inc. of New York. The company, headed by David Einhorn, said New Century executives are not doing enough to boost its stock.
Einhorn said in a statement he may seek changes to New Century’s management or make proposals to explore alternatives.
