YBR and Homeloans comment on merger reports

On Friday, the Australian Financial Review published a story in which it stated that YBR is believed to be in talks to merge with non-bank lender Homeloans Limited.

The AFR said it believed the groups were discussing a deal which would create a company worth more than $220 million.

“YBR is understood to be working on a transaction with the ASX-listed Homeloans, which was put in play when founder Tim Holmes passed away suddenly last year,” it said.

Sources told the AFR that “the deal was one of a couple on YBR's plate as it sought to increase its footprint in mortgage broking.”

YBR and Homeloans responded to the story with respective ASX announcments on Friday.

“Yellow Brick Road Holdings Limited (the company) is aware of media speculation concerning merger or acquisition discussions with other mortgage industry institutions,” the company said.

“The company is often in discussions with many parties on a range of matters. Any current discussions are incomplete and strictly confidential.”

YBR said no agreements have been entered into which would require disclosure to the market.

“If and when a matter warranting disclosure occurs, the company will notify the market in the proper manner.”

Homeloans was also coy on the speculation.

“Homeloans regularly holds discussions with various industry participants regarding a range of potential transactions, at both a corporate and asset level,” the group said.

“Homeloans will update the market as and when required in accordance with the company’s ASX obligations.”

YBR’s past acquisitions include mortgage manager Resi and aggregation group Vow Financial. Both groups were acquired last year.

The group has made no secret of its intentions to build scale in the Australian mortgage market through the procurement of distribution business.

YBR chief executive Matt Lawler told Mortgage Business in June last year that distribution is the key to scale.

“If you look at what Mark [Bouris, executive chairman of YBR] is doing, he has had the architecture for this right from the get-go, to have multiple brands across the front end supported by slick product engines in the back end,” Mr Lawler said.

“We need to build the proper engines in the background, so Macquarie is the product engine we will build there.”

YBR’s relationship with Macquarie – a shareholder in and funder of the group – plays into its mortgage strategy, as explained by Vow Financial chief executive Tim Brown.

Macquarie is the funder behind YBR’s white-label home loans, which have recently been re-labelled as Vow Home Loans, Mr Brown told Mortgage Business in February.

“Obviously we see the benefits of selling some of their other products such as the white-labelled product that is now called Vow Home Loans which we are starting to sell,” he said.

YBR’s strategy is to build size and scale through subsidiary brands such as Vow and Resi, Mr Brown said.

“We are using that scale and size to get better pricing on products, which is what we have achieved through our relationship with Macquarie,” Mr Brown said, adding thatMacquarie has also partnered with the YBR group to distribute wealth products.

“All those things over time will give our brokers better products that they can sell to their clients,” he said.

Mr Brown pointed to Aussie’s acquisition of nMB as a similar example of a branded group looking to build scale.