Frontdoor, Inc. (NASDAQ:FTDR) shares are trading higher after the company inked a deal to acquire 2-10 Home Buyers Warranty (2-10 HBW) in an all-cash transaction for $585 million.

2-10 HBW provides insurance-backed structural warranty protection plans for new homes, offering coverage for builders against structural failures.

The deal is expected to close in the fourth quarter of 2024, subject to regulatory approval and other customary closing conditions.

The transaction brings expansion and diversification, as 2-10 boasts 292,000 customers and generated $198 million in revenue in 2023. Additionally, it will boost earnings, with 2-10 reporting $43 million in Adjusted EBITDA, equivalent to a 21.7% margin in 2023.

The merged company's financial profile is projected to contribute positively to adjusted EBITDA and free cash flow generation in 2025, marking Frontdoor's first complete year of ownership.

Frontdoor, Inc. Chairman and CEO Bill Cobb said, "Additionally, we will be able to diversify and expand into the new home segment, which will open up cross-selling opportunities for home warranties and our on-demand services. In short, through this acquisition, we will gain a highly complementary business that aligns very well with our strategic growth priorities."

As of March-end, Frontdoor's cash balance stood at $378 million.

Price Action: FTDR shares are up 3.61% at $36.78 at the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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