Fintech

Better to merge in SPAC deal that would take the digital homeownership company public

With a $1.5 billion PIPE investment from SoftBank, the transaction would give Better a post-money equity value of about $7.7 billion

Online homeownership platform Better has entered into a merger agreement with a SPAC called Aurora Acquisition Corp. in a deal that would take the company public. The transaction would give Better a post-money equity value of about $7.7 billion and an implied equity value of about $6.9 billion.

A subsidiary of SoftBank, SB Management Limited, is participating in the transaction by committing $1.5 billion through a private investment in public equity [PIPE] investment when the merger closes, and $200 million of it will be committed by Aurora’s sponsor, Novator Capital. Better’s investor Activant Capital is also participating in the PIPE.

Better has seen some tremendous growth. It funded $24.2 billion in loan volume with a 490% year-over-year growth from 2019, $7.7 billion in title insurance place and $1.4 billion in homeowners insurance placed marking 300% growth from 2019, according to a news release. The company reaped in $281.1 million in 2020 for adjusted EBITDA.

“This transaction is the beginning of an amazing new chapter in Better’s history,” Better Founder and CEO Vishal Garg said in a statement. “This transaction provides investment capital to accelerate Better’s growth and support our mission to make homeownership simpler, faster, more affordable and more accessible for all Americans, and eventually everyone else.”

Founded in 2016, Better offers mortgage, real estate, title and homeowners insurance products through its digital platform. Better has benefited from the red hot home buying market and the rise in refinancing activity in the past year as interest rates are incredibly low.

The transaction is expected to close in the fourth quarter of this year and has already been approved by the boards of directors for Better and Aurora. The news release read that “of the total consideration to existing stockholders of Better, $950 million will be paid in cash and the remainder in stock of the new Better.” Also, about $778 million will be used for “general corporate purposes” after paying expenses that are related to the merger.

I reported in April that Better.com has received a $500 million investment from SoftBank that values the digital mortgage lender at about $6 billion, CNBC reported. Better had a funding round in November 2020 where it was valued at $4 billion, Pitchbook data shows.

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