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IPO Plans for Unit of IndyMac Scuttled

July 06, 2006|From Bloomberg News

IndyMac Bancorp Inc. said Wednesday that it had dropped plans for an initial public offering of its Financial Freedom Senior Funding unit and instead will buy out a stake held by the unit's chairman for $40 million.

The Pasadena-based mortgage lender said it would purchase the Financial Freedom shares owned by Chairman and Chief Executive Jim Mahoney.

The price tag for the 6.25% stake is half of what IndyMac paid -- $80 million -- to buy 93.75% of Financial Freedom from Lehman Bros. Holdings Inc. in 2004.

Financial Freedom "will maintain its unique position as an independent company focused on the senior market," Michael W. Perry, IndyMac's chairman and chief executive, said in a statement.

The unit offers reverse mortgages, an arrangement that converts home equity into current income for retirees. An initial share sale would have made Financial Freedom a direct rival of IndyMac in the reverse mortgage business.

An IPO would prevent Financial Freedom from tapping IndyMac's product development expertise. It would also divert the attention of Financial Freedom's management, the statement said.

IndyMac announced May 1 that it would begin evaluating and planning for an initial share sale. Financial Freedom earned $8 million on $1.1 billion in reverse mortgage volume for the first quarter 2006.

Mahoney will be replaced by Michelle Minier, IndyMac's executive vice president of central mortgage operations, on Dec. 31. Both executives will be co-CEOs until year-end. Mahoney will remain as chairman, according to the statement.

Shares of IndyMac fell 60 cents Wednesday to $46.19.

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