Home Capital, mortgage lender that Warren Buffett once saved, snubs takeover bid

Offer valuing company at at least $1.2 billion deemed too low

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Home Capital Group Inc., the Canadian mortgage lender that Berkshire Hathaway Inc. helped rescue five years ago, says it turned down an approach from an unnamed buyer because the price was too low.

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Toronto-based Home Capital didn’t disclose the exact amount of the offer but said it was more than $28.60 a share — the maximum price on a stock buyback it recently announced. That means the takeover approach valued the company at at least $1.2 billion.

The board determined the cash offer “undervalues the company’s shares and falls short of reflecting Home Capital’s intrinsic value and its future growth potential,” Home Capital said in a statement. It said the unnamed third party had “previously made an unsolicited, non-binding proposal” to buy the company but that offer was “subsequently terminated.”

Home Capital consulted BMO Capital Markets and TD Securities, as well as law firm Torys LLP, for advice.

The company, which primarily serves borrowers who can’t easily qualify for mortgages from Canadian banks, nearly collapsed in 2017 after it suffered a run on deposits. Warren Buffett’s Berkshire bought a nearly 20 per cent equity stake and provided an emergency line of credit to stabilize the firm. Berkshire exited most of its stake at a significant profit in 2018.


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