Rocket Companies (NYSE: RKT) has inked a deal to acquire the leading personal finance app company Truebill in an all-cash transaction worth $1.275 billion.
RKT is a personal finance company consisting of tech-driven real estate, mortgage, and financial services businesses. Its flagship company, Rocket Mortgage, is the largest mortgage lender in the U.S. The company’s other personal finance and consumer service brands include Rocket Homes, Rocket Loans, and Rocket Auto, to name a few.
However, following the news, shares of Rocket Companies dropped 6.3% to close at $14.46 on December 20.
With a user base of 2.5 million members, Truebill helps consumers by managing subscriptions, improving their credit scores, tracking spending, and building budgets through a simple, user-friendly app. Both its revenues and user base have doubled in 2021 versus 2020.
At present, the company analyzes $50 billion in monthly transaction volume. It also renegotiates bills on its clients’ behalf and has saved consumers more than $100 million since its inception in 2015.
Notably, Truebill was recently named the #1 Consumer Tech Company on The Information’s list of the 50 Most Promising Startups. Furthermore, it also ranked #19 on the Deloitte Fast 500 list of the fastest-growing technology and life sciences companies in the U.S.
Synergies from the Acquisition
The acquisition will add fast-growing financial empowerment fintech to the Rocket platform and also strengthen its client base by adding Truebill users.
Further, Truebill’s technological expertise will enhance Rocket Companies’ real estate and home financing platform capabilities to better manage consumers’ financial lives.
The deal is expected to be accretive by the addition of a new organic growth opportunity. It is expected to generate $100 million in annual recurring revenue over and above Rocket’s $1.3 billion annualized servicing fee income.
The acquisition is expected to close by the end of this year, subject to certain regulatory approvals.
Management Weighs In
Rocket Companies CEO, Jay Farner, commented, “We are very impressed with what Truebill has created – providing a simple, intuitive client experience to help its users save significant money,”
He further added, “The company is a perfect fit for the Rocket platform. Truebill’s work helping Americans keep track of their finances and providing guidance that leads to better financial outcomes follows the same philosophy as Rocket Companies – leveraging the power of technology to remove the friction from complex transactions – and applies it to everyday life.”
Wall Street’s Take
On December 16, Wells Fargo decreased its price target on Rocket to $17.00 (17.6% upside potential) from $20.00 and reiterated a Hold rating.
Overall, the stock has a Hold consensus rating based on 7 Holds and 1 Sell. The Rocket price target of $17.94 implies 24.1% upside potential from current levels.