Shares of the mortgage giant Rocket Companies (RKT -9.40%) were trading about 8% lower at 11:48 a.m. ET today, after the company announced plans to acquire the large mortgage servicing company Mr. Cooper Group.

Trying to gain market share

It's clear that Rocket is trying to consolidate and gain market share amid a challenging high-interest-rate environment that has now dogged the mortgage sector for the last few years. A few weeks ago, Rocket announced that it would acquire Redfin in a $1.75 billion deal.

For Mr. Cooper Group, Rocket will pay the equivalent of $9.4 billion in an all-stock deal. The company expects to incur $400 to $500 million in acquisition-related expenses but then realize $500 million in annual pretax savings. The deal is expected to be immediately accretive to earnings and boost earnings in a mid-teens percentile in 2026. The deal will also add another 7 million clients to Rocket's customer base, and the company will now be involved in one out of every six mortgages in the U.S.

"By combining Mr. Cooper and Rocket, we will form the strongest mortgage company in the industry, offering an end-to-end homeownership experience backed by leading technology and grounded in customer care," Jay Bray, chairman and CEO of Mr. Cooper Group, said in a statement. Bray will become president and CEO of Rocket Mortgage when the deal closes, which is expected to happen in the fourth quarter of 2025.

Offering additional revenue diversity

While Rocket currently makes the bulk of its revenue from originating mortgages, a business that doesn't perform as well when interest rates are high, Mr. Cooper Group makes the bulk of its revenue from servicing mortgages. This business performs better when rates rise because fewer people refinance, which increases the value of mortgage servicing rights (MSR).

The combined company will have a better balance of origination and MSR revenue, perhaps making it less beholden to the rate environment, which tends to lead to a better valuation. I don't think this is a bad strategy for Rocket to pursue, but given that it's an all-stock deal that will dilute shareholder equity initially, it's no surprise to see the stock trading lower today.