Business Context and Reporting Period
Finance of America Companies Inc. (FOA) filed this Form 8-K on December 6, 2022, to disclose the entry into material definitive agreements. The filing details a strategic acquisition of American Advisors Group (AAG) and a concurrent private equity investment.
Key Financial Metrics and Transaction Terms
This filing describes a transaction structure rather than reporting periodic financial performance metrics such as revenue or net income. Key financial terms include:
- Acquisition Consideration: FOA's subsidiary (FAR) will pay AAG $10 million in cash.
- Equity Consideration: FOA will issue one share of Class B Common Stock to AAG.
- Unit Consideration: FOA Equity Capital (FOAEC) will issue up to 33,893,666 Class A Units to AAG (19,692,990 at closing, remainder contingent on future events). These units are exchangeable for FOA Class A Common Stock on a one-for-one basis.
- Concurrent Equity Investment: Blackstone Investor and BL Investor will purchase 10,869,566 shares of FOA Class A Common Stock for an aggregate price of $15 million.
- Share Price Basis: The equity investment price is based on the volume-weighted average price of FOA Class A Common Stock over the 15 trading days ending December 6, 2022.
Material Changes and Transaction Scope
The primary material change is the proposed acquisition of a substantial majority of AAG's assets and certain liabilities. This includes:
- Certain residential reverse mortgage loans.
- Servicing rights for loans originated under the Federal Housing Administration's Home Equity Conversion Mortgage (HECM) program.
- Use of proceeds from the $15 million equity investment for general corporate purposes and/or to fund costs associated with the AAG Transaction.
Guidance, Risks, and Conditions
The transaction is subject to several material conditions and risks:
- Regulatory Approvals: Closing is contingent upon the expiration of the Hart-Scott-Rodino Antitrust waiting period and consent from the Government National Mortgage Association (Ginnie Mae) to transfer servicing rights without adverse modifications.
- Termination Rights: Either party may terminate the agreements if the transaction is not consummated by April 6, 2023. This date may be extended by FAR to no later than December 6, 2023, under specific circumstances.
- Forward-Looking Risks: Management notes risks regarding the failure to satisfy closing conditions, delays in consummation, and the potential for transaction costs to exceed expectations.
Investor Verification Checklist
- Verify the status of the Ginnie Mae consent for the transfer of servicing rights.
- Monitor the expiration of the HSR Act waiting period to confirm the transaction timeline.
- Review the specific performance milestones required for the issuance of the contingent FOAEC Units to AAG.
- Confirm the final closing date relative to the April 6, 2023, termination deadline.
- Assess the impact of the $10 million cash outlay and equity dilution on FOA's capital structure.