Guaranteed Rate, which founder Victor Ciardelli has grown into one of the nation’s largest mortgage lenders, is selling a large 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 investment believed to be worth more than $100 million in the Chicago-based firm, best known for its name adorning White Sox park.
The companies announced the transaction today, saying THL would be taking a “meaningful 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 weren’t disclosed.
Proceeds will be used to repurchase shares held by many of the private investors who helped Ciardelli launch the firm in 2000.
But there will be additional capital left over to accelerate investments in technology and people, as Ciardelli continues to map out growth plans. In addition, he said in an interview, Guaranteed Rate will be able to broaden the set of specialized mortgages it can offer on higher-priced homes.
THL, which focuses on middle-market growth companies, has raised more than $22 billion since its founding 43 years ago.
“While evaluating different opportunities in the mortgage space, it became clear to us that Guaranteed Rate is well-positioned to thrive and grow marketshare moving forward, and that it is a great company to partner with in the mortgage market,” THL Managing Director Ganesh Rao said in a statement.
For Ciardelli, this is a major step in the evolution of a company that now employs about 4,100 nationwide, 700 of those at its Ravenswood headquarters in Chicago.
The deal will give THL two seats on Guaranteed Rate’s seven-member board and, more important, input as a major shareholder into how Ciardelli runs the business. An iconoclast at times in his career, often with positive results, Ciardelli now will have to work with financially sophisticated investors looking over his shoulder.
But he will retain control over the strategy of the company.
“It took us a year to get it done,” Ciardelli said of the deal. “I got to know them very well. Culturally, it’s a perfect fit. . . .I don’t feel things are any different in terms of how we run and grow the business.”
The transaction also raises questions about Guaranteed Rate’s status over the longer haul as a privately held company. Ordinarily, institutional investors like THL have a time horizon of no more than five years to cash out their stakes.
That can mean an initial public offering, a sale to a larger player in the industry or a sale to another private-equity firm. The eventual outcome will be important to Guaranteed Rate’s status as a large-scale growth company headquartered in Chicago.
Guaranteed Rate generated more than $778 million in revenue in 2016. It expects to originate more than $20 billion in home loans this year.
It was the 15th largest mortgage lender in the U.S. in the first half of 2017, with volume of $9.25 billion, according to trade publication Inside Mortgage Finance.
“I love what I’m doing,” Ciardelli said. “I feel like I have a lot of gas in the tank.”