Private equity company Lone Star Funds has cut its offer for mortgage lender Accredited Home Lenders by 44%. Lone Star sent a letter to Accredited's board saying it is now offering to pay $214 million ($8.50/share). The lender had originally agreed to be bought by Lone Star for $400 million ($15.10/share) on June 4th. However the private equity company has been trying to back out of the deal, pointing out a the "drastic deterioration" of Accredited's financial situation. Late last week, Accredited was forced to stop accepting new home loan applications and cut 62% of its workforce (full story). Lone Star is also looking to end the legal battle that ignited between the two companies once Lone Star tried to back out of the deal. "I wouldn't blame Lone Star for trying to get a cheaper deal given what's going on in the U.S. subprime market," noted Hugh Young from Aberdeen Asset Management. "Fundamentals of the U.S. housing market weren't really there in the first place." Lone Star's new $8.50 offer represents a 32% premium over the $6.31 closing price of Accredited on Thursday. In pre-market trading on Friday, Accredited traded up 40.25% to $8.85, signaling that perhaps Wall Street thinks Lone Star may better its current bid.
Sources: Press Release, Bloomberg, CNN
Commentary: Lone Star Files Counterclaim Against Accredited Home • Lone Star, Accredited Deal is Still On - For Now
Stocks/ETFs to watch: LEND. Competitors: WFC, FNM. ETFs: KBE
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