American Home Mortgage Holdings to buy Apex Mortgage for 1.14 times revenue

The Deal: American Home Mortgage Holdings has agreed to acquire Apex Mortgage Capital Inc. for $6.21 per share, or about $186 billion. The transaction has been approved by the boards of both companies and is expected to close by September 30, 2003.

Discussion: Apex Mortgage Capital is a real estate investment trust. The company focuses on fixed-rate mortgage assets in the secondary market, but also buys adjustable-rate mortgages. Apex purchases the securities through broker-dealers and banks. The company is managed by TCW Investment Management, a subsidiary of Los Angeles-based investment firm TCW Group.

American Home Mortgage Holdings operates more than 130 mortgage loan offices and also originates and sells mortgage loans via the Internet. The company also conducts business through subsidiaries, including Home Mortgage Corp. and Columbia National, Inc.

The acquisition is part of a strategy to diversify American Home Mortgage's business model. Most of American Home's earnings are based in mortgage origination, which traditionally decreases as interest rates rise. Apex has a significant portfolio of adjustable-rate mortgages, which should help stabilize American Home's income if interest rates increase. American Mortgage also plans to become a real estate investment trust to reduce its tax payments.

Copyright NVST, Inc. Jul 21, 2003
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