As CCM is poised to win the TWO bidding war, an integration test awaits

With CrossCountry Mortgage’s deal to acquire Two Harbors Investment Corp. one step closer to the finish line after securing shareholder approval, the focus is shifting to what may be the next major challenge: integrating the businesses. Industry experts pointed out the complex task of bringing a large servicing portfolio in-house, but analysts expressed confidence in CCM’s ability to combine both companies without losing track of its financials, while flagging rising leverage. Like its peers, CCM is seeking scale in mortgage servicing rights (MSRs). TWO would bring a $159 billion portfolio to CCM’s $202 billion as of the first quarter, per Inside Mortgage Finance. The deal pushes the lender from the No. 15 spot into the No. 8 spot among top servicers by owned portfolio. If the acquisition closes as currently designed, CCM will pay about $1.26 billion, after weathering a public bidding battle with United Wholesale Mortgage that increased the price by about $126 million. The company raised its cash bid from $10.80 per share in March to $11.30 in April and then to $12 in May, adding a dividend component. The current price came in at a 19% premium to TWO’s end of March tangible book va...