FNFV will become 'investment vehicle' once spinoffs are finished


  • By Mark Basch
  • | 12:00 p.m. February 6, 2017
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Several months from now, the ever-confusing mix of businesses under the Fidelity National Financial Inc. umbrella should be much clearer after Fidelity completes a spinoff of two companies under its control.

As Fidelity announced late in 2016, the company plans to distribute its majority stake of 83.3 million shares of Black Knight Financial Services Inc. to Fidelity shareholders.

Fidelity also will spin off its Fidelity National Financial Ventures investment subsidiary, or FNFV, as a separate public company.

Fidelity hasn’t announced a corporate structure for an independent FNFV. But during quarterly conference calls for Fidelity and FNFV last week, Fidelity Chairman Bill Foley did give some insight on what the new FNFV will be.

While not a separate company now, FNFV has a tracking stock trading on the New York Stock Exchange. Once it is spun out, FNFV — which owns stakes in a wide range of businesses — will be able to raise additional cash to make more investments, Foley said.

“That’s one of the reasons we want to get FNFV out from the FNF tracking stock umbrella,” he said. “In retrospect, maybe we just should have created a company and spun it out to start with.”

FNFV does not expect to own businesses outright but will instead make investments in them.

“FNFV is going to be an investment vehicle that’s going to own controlling interests because we don’t want to be an investment company,” said Foley, although many people would say an “investment vehicle” and “investment company” are the same thing.

FNFV under Fidelity’s ownership makes money by actively buying and selling shares of businesses, but it probably will be quiet for the next few months as it works on the spinoff plan. It needs to put together separate audited financial statements before completing the spinoff and new deals could impact that.

“We don’t necessarily want to do any big corporate transactions that might push that timeframe further out than it needs to be,” Fidelity Executive Vice President Brent Bickett said.

Foley said the company is hoping to complete the distribution of its Black Knight shares in mid-June to mid-July, and to complete the FNFV spinoff after that.

When the wheels stop spinning, there will be four independent public companies headquartered at Fidelity’s Riverside Avenue complex: Fidelity, FNFV, Black Knight and Fidelity National Information Services Inc., which was spun off from Fidelity National Financial in 2006.

As four separate companies, hopefully the operations of all will be much easier to understand.

Fidelity expanding title business

Fidelity National Financial will be mainly a title insurance company once the deals are done, but it does plan on expanding its reach in title-related businesses, Foley said.

“We’re very interested in the business of controlling the real estate transaction from the point of time that the listing is opened with the Realtor and then managing that transaction on behalf of the Realtors and lenders all the way through the title, all the way through the close,” he said.

Fidelity also continues to expand its title business, making “12 or 13” relatively small acquisitions last year to increase its network of title agents and its market share, Foley said.

The company reported fourth-quarter adjusted earnings of 71 cents a share, up from 55 cents in the fourth quarter of 2015 and 9 cents higher than the average analyst’s forecast, according to Yahoo Finance.

Black Knight earnings rising

Black Knight reported higher fourth-quarter earnings and said it expects earnings to continue to rise this year.

Fourth-quarter adjusted earnings rose by 4 cents a share to 30 cents, with revenue rising 10 percent to $263 million.

Black Knight provides processing services for more than 60 percent of all U.S. first mortgage loans and its share of the industry should grow after adding more lenders as customers in 2016.

“We exceeded our internal plans and the guidance we provided at the beginning of the year for all key financial metrics and had what we believe was a record sales year,” CEO Thomas Sanzone said in the company’s conference call.

“This exceptional year for sales means 2017 will be an implementation year for Black Knight. Implementations for many of the clients we have signed over the past several quarters will be complete around the middle of 2017 and into 2018,” he said.

Those new sales will increase earnings. After reporting adjusted earnings of $1.15 for all of 2016, Black Knight forecast 2017 earnings of $1.32 to $1.36 a share.

Black Knight’s stock opened $2.35 higher at $39 Thursday morning after the earnings report before closing at $38 Thursday.

Foley retiring from FIS

Foley has remained involved with Fidelity National Information Services, or FIS, since the banking technology company was spun off from Fidelity National Financial, serving as vice chairman of the board.

However, Foley is severing his ties with FIS.

In a Securities and Exchange Commission filing, FIS said Foley and another director, Richard Massey, will retire from the board when their terms expire this spring.

The retirements “were based on the time commitment necessary to pursue other business interests,” the filing said.

Foley has a wide range of business interests beyond Fidelity and the spinoff companies.

Most notably, he is the lead partner in a National Hockey League expansion franchise in Las Vegas that will begin play next season.

Rayonier AM drops after earnings

Rayonier Advanced Materials Inc. reported fourth quarter adjusted earnings of 18 cents a share, down from 32 cents in the fourth quarter of 2015 but 2 cents higher than the average analyst’s forecast, according to Yahoo Finance.

Despite beating expectations in the fourth quarter, Rayonier AM’s stock dropped $3.21 to $13.57 Tuesday after the report because investors were disappointed in its 2017 forecast.

The Jacksonville-based company, which produces cellulose specialties products, forecast net income of $41 million to $48 million in 2017, which would be down from $67 million in 2016.

While that forecast was disappointing, “we would not be shocked to see the forecast raised as the year moves on,” D.A. Davidson analyst Steven Chercover said in a research note.

Rayonier AM’s stock has had several big drops in the past three years since it split up with Rayonier Inc., because of disappointing financial results. But it had been rebounding and had been up by more than 130 percent over the past year before the earnings report, Chercover said.

“While the sell-off was a painful flashback to previous Rayonier AM disappointments, we view the pullback as an attractive buying opportunity for those able to stomach the near-term volatility that we would attribute to a conservative guide,” he said.

Landstar System beats expectations

Landstar System Inc. reported fourth-quarter earnings of 94 cents a share, 6 cents higher than the fourth quarter of 2015 and above the Jacksonville-based trucking company’s forecast of 85 cents to 90 cents.

“Our 2016 results reflected a soft operating environment and low economic growth in the U.S. that negatively impacted revenue per load on loads hauled via truck. Even with these challenges and typical year-over-year comparison, 2016 earnings per share was the second highest earnings per share in the company’s history,” CEO Jim Gattoni said in Landstar’s conference call.

“We continue to focus on profitable load volume growth and increasing our available capacity to haul those loads. With continued load volume growth we are well-positioned for the pricing environment improvement,” he said.

Gattoni projected first-quarter earnings of 70 cents to 75 cents a share, in line with the average analyst’s forecast of 73 cents, according to Yahoo.

Despite beating forecasts for the fourth quarter, Landstar’s stock fell 20 cents to $83.75 Thursday after the earnings report. However, the stock had surged during the last two months of 2016 as part of the transportation rally following the election.

Deductions give International Baler profit

International Baler Corp. reported a sharp drop in sales in fiscal 2016, which ended Oct. 31. But because of a tax benefit, the Jacksonville-based maker of balers used for recycling and waste disposal still recorded a profit for the year.

Sales for the fiscal year fell 35.6 percent to $11.65 million, due in large part to lower shipments of higher-priced synthetic rubber balers, the company said in its annual report.

Because of the lower sales, International Baler had an operating loss of $23,102 for the fiscal year. However, the company “claimed favorable tax deductions” which resulted in a net profit of $90,410 for the year.

BAE gets contract for USS Roosevelt

BAE Systems last week said it was awarded a contract of at least $51.3 million, which could reach $68.4 million, for maintenance and modernization of the USS Roosevelt at the company’s Jacksonville facilities.

BAE operates shipbuilding and repair facilities at Mayport Naval Station and on Heckscher Drive. Work on the Roosevelt will be done at both facilities and begin in April, with completion scheduled for April 2018.

The company has 530 permanent employees and 260 temporary workers at the two facilities, BAE spokesman Karl Johnson said. The permanent workforce was about 800 two years ago before a series of layoffs.

He said the Roosevelt contract will not result in any “mass hiring” but “it’s a great win for our team.”

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