Acquisition will help securities firm build its residential business
Aug 10, 2006

Morgan Stanley said yesterday that it will buy Saxon Capital Inc. for $706 million.  The New York securities firm, the world's largest, will acquire all of the outstanding shares of Saxon, a residential mortgage lending and servicing company, for $14.10 per share in cash. The price is a 29 percent premium to Tuesday's closing price of $10.97.  The transaction is expected to be completed by year's end, pending regulatory and shareholder approval.

Saxon employs about 1,100 people. It was unclear yesterday how many people would be retained in the purchase.Phone calls to Saxon were referred to Morgan Stanley.  Morgan Stanley, while big in commercial real estate, is building its residential business. Saxon, a real estate investment trust, originates and services mortgage loans mostly for customers with below-average credit. (Subprime)

The servicing of mortgage loans can be counter-cyclical in a cooling housing market, Lakes said. "In a falling environment, more loans will fall into special servicing." He said he was not necessarily talking about defaults on mortgages, but distress situations, which bring higher fees.

Saxon Chairman Richard A. Kraemer said in a statement that Morgan Stanley's large scale and deep pockets will enhance Saxon's business, particularly in a consolidating market.  Saxon operates through Saxon Mortgage Inc., which services a loan portfolio of $26.4 billion. It has offices in Fort Worth, Texas, and Foothill Ranch, Calif., in addition to Glen Allen.

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