Ellie Mae Inc. (ELLI), whose software is used to make one-third of all mortgages in the U.S., is considering a sale and has interviewed banks to manage the process, three people with knowledge of the matter said.
Ellie Mae may begin soliciting bids in the next two months, two people said, asking not to be identified because the process isn’t public. The shares rose yesterday to their highest since Ellie Mae went public in April 2011, giving the Pleasanton, California-based company a market value of about $820 million.
The company’s software offers ways of automating the mortgage process. With the U.S. housing market recovering, Ellie Mae raised its forecast last week for full-year sales to as much as $132.5 million, a 30 percent jump from 2012. Single-family home prices rose in 87 percent of U.S. cities in the second quarter, the National Association of Realtors said yesterday.
For Ellie Mae, “now would be the good time to sell, when they have strong forward estimates and strong valuation,” Carter Malloy, an analyst at Stephens Inc. said by telephone from Little Rock, Arkansas. “The question is, is this a good time for a buyer?”
Rising borrowing costs may hurt future demand for homes. Mortgage rates for 30-year loans have climbed from a near-record low of 3.35 percent in early May to 4.4 percent in the week ended yesterday, according to McLean, Virginia-based Freddie Mac.
Large banks, large system integrators, financial-services data providers and software providers could be interested in Ellie Mae, Brian Schwartz, an analyst with Oppenheimer & Co., said in a phone interview from San Francisco.
“There has been heightened consolidation in this space, no doubt about it,” he said. “I see lots of buyers.”
Ellie Mae has a price-book ratio of 4.5, versus an average of 1.5 among U.S. mortgage-finance companies with market values exceeding $500 million, according to data compiled by Bloomberg. The stock gained 13 percent to $30.98 at the close in New York yesterday.
Chief Executive Officer Sigmund Anderman said at an investor conference this week that the company’s technology is currently used to fund and process about one-third of all mortgage loans made in the U.S.
An external spokeswoman for Ellie Mae said the company doesn’t comment on rumors when asked about a potential sale.
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