Iress has agreed to sell its UK mortgage business to Bain Capital for £85mn ($A164.3mn).
Iress’ mortgages business provides mortgage sales and origination software (MSO) and associated consulting services to banks and building societies in the UK.
Iress bought the mortgages business more than 10 years ago, during which time the company said it had “become a leading provider of mortgage origination software in the UK”.
This sale is expected to complete in mid-2024 and is subject to approval.
The proceeds from the transaction are set to repay debt, which stood at $320mn net in December of last year.
This deal was received positively by Financial Technology Research Centre founder and director, Ian McKenna, who said: “The new Australian management have committed to giving control of the UK business to the UK exec team.
“It is good to see them jettisoning what was a non-core part of the business, supporting mortgage lenders so the UK team can focus on the parts of their business that support wealth, protection, and mortgage advisers.”
McKenna added that, having cut staff in the UK at the end of last year, Iress was a “leaner and more dynamic business” that is beginning to show “some good wins”.
“They still have a way to go but these signs are positive,” he additionally stated.
Iress Group chief executive Marcus Price said: “Our decision last year to focus on our core strengths means now is the right time for the mortgages business to build on the strength of its product platform under new ownership.
“We saw strong interest in our mortgages business through the sale process and we’re delighted that we are announcing this transaction ahead of schedule. It is perhaps the most significant milestone achieved to date in Iress’ transformation, which sets out our plans to simplify our structure, create a more transparent and sustainable business and find new owners for businesses which are no longer strategically aligned to Iress’ objectives.
“We are delighted to have found an acquirer in Bain Capital with the expertise and capital to appropriately invest in the growth of MSO for the benefit of its customers and employees.”
Earnings impact
Insight was provided by Australian investment banking firm Barrenjoey into what earnings impact the sale would have on Iress, as the UK mortgages segment reported a revenue of approximately $36mn in 2023.
While overheads and project costs are likely to remain with Iress in the short term, Barrenjoey stated that they would look to be managed down over time as divestments continue.
Barrenjoey added that costs of debt for Iress is currently around 6 per cent, thereby suggesting a pre-tax interest saving of around $8mn.
“The net of the sale is a negative pre-tax impact of around $11mn in the short term, and less so over time as the overhead allocation of around £7mn in mortgages is managed down,” Barrenjoey added.
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