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Green Tree deal has tradeoffs for buyer


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  • | 3:19 p.m. April 4, 2011
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Walter Investment Management Corp. announced last week it will pay just more than $1 billion to buy a Minnesota loan servicer. Now investors in the Tampa-based company may be wondering what they're getting in return.

Shares of Walter Investment on the American Exchange fell 13% the day of the announcement, rebounding slightly to $17.25 the next day. The stock had reached a 52-week high of $20.22 earlier in March.

Walter Investment, the last remaining local segment of Jim Walter's former corporate empire, said March 28 it will acquire Green Tree Credit Solutions in a deal combining stock, debt and cash. Green Tree, based in St. Paul, Minn., provides third-party services on credit-sensitive consumer loans. That contrasts with Walter Investments' business model, which largely focuses on interest income.

“The ability to generate revenues from recurring, fee-based sources, with high operating margins from an asset-light platform, is an especially attractive addition to our existing business model,” Mark O'Brien, CEO and chairman at Walter Investment, states in a release.

Besides taking a short-term hit in its stock value, Walter Investment will be giving up its status as a real estate investment trust, which in turn could lead to a higher tax burden. The company recorded an $81.3 million tax benefit after obtaining REIT status two years ago.

 

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