Intuit to acquire Rock Financial for 4.12 times revenue

Weekly Corporate Growth Report, Oct 18, 1999

The Deal: Intuit Inc. has agreed to acquire Rock Financial Corp. for $370 million in stock. The acquisition will continue Intuit's aggressive expansion of its Internet-based financial services. Rock shareholders will receive from 0.58 to 0,84 of an Intuit share for each of their shares. On the news, Rock fell 12.5 cents, or 0.6%, to $20.00/share. Intuit fell $3.125, or 10.0%, to $27.00/share.

Discussion: Rock Financial is a financial services company. It offers conventional, Fannie Mae, Freddie Mac, subprime, and other home and personal loans through its Rockloans.com website, as well as its three loan and call centers. The company has a joint venture with Michigan National Bank and provides mortgages to the bank's customers. It does not securitize its loans but sells them in bulk or as whole loans.

Intuit is the leading maker of personal finance software. Its small-business accounting and tax software generates half of its sales. The company also makes Quicken personal finance and TurboTax tax filing applications. The Internet has created a simplified opportunity for finance transaction processing. As a result, the company offers Internet products and services such as a financial news site Quicken.com, payroll processing, insurance marketing, and mortgage filing.

The acquisition is part of Intuit's plan create an integrated national online mortgage service. The company will be able to offer direct-lending services to its users instead of having to refer them to other mortgage lenders.