Guaranteed Rate, whose founder Victor Ciardelli has become one of the largest mortgage lenders in the country, is selling a significant stake to outside institutional investors for the first time in its 17-year history.
Boston-based private equity firm Thomas H. Lee Partners is making an estimated investment of more than $100 million in the Chicago-based company best known for its name gracing the White Sox’s grounds.
The companies announced the transaction today, saying THL would take a “significant minority stake” in Guaranteed Rate. Ciardelli, 51, will remain CEO and chairman of the board. The deal is expected to close in the first quarter of 2018. Terms were not disclosed.
The proceeds will be used to buy back shares held by numerous private investors who helped Ciardelli launch the company in 2000.
But there will remain additional capital to accelerate investments in technology and people as Ciardelli continues to develop plans for growth. Plus, he said in an interview, the guaranteed rate will be able to expand the set of specialty mortgages it can offer on higher-priced homes.
THL, which focuses on mid-market growth companies, has raised more than $22 billion since its inception 43 years ago.
“As we evaluated different mortgage lending opportunities, it became clear to us that Secured Rate is well positioned to thrive and grow market share in the future, and is a great business with which to partner in the mortgage market,” said THL’s chief executive. Ganesh Rao said in a statement.
For Ciardelli, this is a major step in the evolution of a company that currently employs approximately 4,100 people nationwide, including 700 at its Ravenswood headquarters in Chicago.
The deal will give THL two seats on Guaranteed Rate’s seven-member board and, more importantly, input as a major shareholder in how Ciardelli runs the business. Iconoclastic at times in his career, often with positive results, Ciardelli will now have to work with financially sophisticated investors looking over his shoulder.
But he will retain control over the company’s strategy.
“It took us a year to do it,” Ciardelli said of the deal. “I got to know them very well. Culturally, it’s a perfect fit…I don’t think things are any different when it comes to how we run and grow the business.”
The transaction also raises questions about Guaranteed Rate’s long-term status as a private company. Typically, institutional investors like THL have a time horizon of no more than five years to cash out their holdings.
This may mean an initial public offering, a sale to a larger player in the industry, or a sale to another private equity firm. The end result will be important to Guaranteed Rate’s status as a Chicago-based, large-scale growth company.
The guaranteed rate generated more than $778 million in revenue in 2016. It expects to generate more than $20 billion in home loans this year.
It was the 15th largest mortgage lender in the United States in the first half of 2017, with volume of $9.25 billion, according to trade publication Inside Mortgage Finance.
“I love what I do,” Ciardelli said. “I feel like I have a lot of gas in the tank.”