Fidelity National Financial (FNF), the largest title insurance underwriter and a provider of mortgage services and other services, has reachead an agreement this week to purchase mortgage services and analytics firm Lender Processing Services, Inc. (LPS), in a $2.9 billion deal.
The deal is still subject to approval by LPS and FNF stockholders, approvals from applicable federal and state regulators, and certain conditions of the agreement-- for instance, LPS has a period of time in the deal where it can solicit offers from other prospective buyers in order to get a better deal than the price FNF has agreed to pay.
Closing of the transaction is currently expected by the companies to occur in the fourth quarter of 2013. FNF says that when the deal closes it will combine its ServiceLink business with LPS and form a new consolidated holding company, and then will sell a 19% minority equity interest in the new consolidated holding company to funds affiliated with Thomas H. Lee Partners, L.P. for approximately $381 million in cash. FNF will retain an 81% ownership interest in the new consolidated holding company.
“We are excited to welcome LPS and its market-leading technology and services to the FNF family,” said FNF Chairman William P. Foley, II. “We have significant experience and familiarity with LPS from our previous ownership of these businesses. This combination will create a larger, broader, more diversified and recurring revenue base for FNF and makes us the nation’s leading title insurance, mortgage technology and mortgage services provider. We believe there are meaningful synergies that can be generated through the similar businesses in centralized refinance and default related products, elimination of some corporate and public company costs and the shared corporate campus. We have set a target of $100 million for cost synergies and are confident that we can meet or exceed that goal. Including those cost synergies, the transaction is 11.3% accretive to pro-forma 2012 net earnings. We also expect the transaction to be meaningfully accretive to future earnings and we look forward to creating significant value for our shareholders through this strategic transaction.”
“As the mortgage industry continues to face increasing regulation, participants in the industry are seeking out those strategic partners who offer quality, comprehensive solutions, a strong balance sheet and a commitment to innovation,” said Hugh Harris, President and CEO of LPS. “The combined LPS and FNF offer comprehensive technology and services to address many of the challenges facing the industry today and the best solutions to support future success.”