JACKSONVILLE, FLA. — Fidelity National Financial has entered into a definitive agreement to acquire Lender Processor Services Inc., a provider of integrated technology, services, data and analytics to the mortgage and real estate industries, for $2.9 billion, or $33.25 per common share.
William Foley, chairman of Fidelity, says his title insurance company has “significant experience and familiarity” with Lender Processor from its previous ownership of these businesses. He expects the combination of the two Jacksonville-based companies to create a larger, broader, more diversified and recurring revenue base for Fidelity.
“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,” says Foley. “We have set a target of $100 million for cost synergies and are confident that we can meet or exceed that goal.”
Under terms of the agreement, Fidelity will pay 50 percent of the consideration for the Lender Processor shares in cash and 50 percent in shares of Fidelity stock. The purchase price represents a 19 percent and 25 percent premium, respectively, to the prior 30-day and 60-day average closing prices for Lender Processor’s stock through May 22. May 22 was the last trading day before media reports regarding a potential transaction started circulating.
At closing, Fidelity will combine its ServiceLink business with Lender Processor in a new consolidated holding company. Fidelity will sell a 19 percent minority equity interest in the new consolidated holding company to funds affiliated with Thomas H. Lee Partners LP for about $381 million in cash. Fidelity will retain an 81 percent ownership interest in the new enterprise.
“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,” says Hugh Harris, president and CEO of Lender Processor. Combined, the two companies offer technology and services to address many of the challenges facing the industry today and solutions to support future success, according to Harris.
The acquisition agreement includes a “go-shop” period effective through July 7 during which Lender Processor can actively solicit alternative acquisition proposals from third parties. The acquisition agreement also contains a break-up fee equal to about 1.25 percent of the total equity value of $2.9 billion payable to Fidelity if Lender Processor terminates the acquisition agreement based on receiving a better proposal during the “go-shop” period.
The transaction is subject to approval by stockholders of both companies, approvals from applicable federal and state regulators and satisfaction of other customary closing conditions. The transaction is expected to close in the fourth quarter.
Bank of America Merrill Lynch and J.P. Morgan Securities LLC acted as financial advisors and are providing committed financing to FNF on the transaction. Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co. served as financial advisors to Lender Processor.
— Rachel Goff