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Scanlon

FNF in rumored talks to buy LPS

by Mark Basch, Contributing Writer

Lender Processing Services Inc., which was spun off as a separate public company in 2008, may be coming back under the Fidelity National Financial Inc. umbrella again.

The Wall Street Journal reported Wednesday night that Fidelity is in "advanced talks" to acquire LPS again in a $2.9 billion deal that could be completed as early as next week.

The Journal said the deal also would include investment firm Thomas H. Lee, which has been involved in deals with Fidelity in the past. Thomas H. Lee would own 19.9 percent of LPS, it said.

LPS provides mortgage processing technology services for home lenders. Fidelity originally acquired the business from Alltel Corp. in 2003 and combined it with other financial processing businesses it owned.

The financial processing businesses were spun off into a separate company called Fidelity National Information Services Inc., or FIS, in 2006. LPS was then spun off from FIS in 2008.

All three companies are headquartered in the same office complex along Riverside Avenue in Jacksonville, which was originally the home of the mortgage processing business under several different owners.

Fidelity National Financial moved its corporate headquarters from California to Jacksonville after acquiring the business from Alltel.

When asked about LPS by email this morning, Fidelity CEO George Scanlon said "we can't comment on rumors or speculation."

Earlier on Wednesday, at Fidelity's annual shareholders meeting at the Riverside complex, Scanlon gave no hint that a major deal was in the works, but he did say he expected the company to grow in size.

Fidelity, which is mainly a title insurance company, grew last year after it consolidated its investments in the restaurant business and auto parts company Remy International Inc. into its overall financial results.

Fidelity owns a majority stake in Remy and two restaurant companies that own the O'Charley's, J. Alexander's, Stoney River Legendary Steaks, Ninety Nine Restaurant, Max & Erma's, Village Inn and Bakers Square chains.

Those investments into other businesses increased Fidelity's revenue from $4.8 billion in 2011 to $7.2 billion last year. As it grew in size, Fidelity rose from 472nd in last year's Fortune 500 list of the largest U.S. companies to 353rd this year.

"Our expectation is we'll move even higher in 2013," Scanlon said.

Scanlon's overview of the company for shareholders focused on the strong performance of Fidelity's title insurance business.

"We are the nation's largest and most profitable title insurance company," Scanlon said.

Scanlon pointed to data showing that the profit margin in Fidelity's title business has more than doubled from 6.6 percent in 2009 to 14.1 percent last year.

Fidelity's 2012 profit margin was much higher than the title industry's overall margin of 7.7 percent. Even in a down year for the industry in 2009 as the housing market slumped, Fidelity's 6.6 percent margin was well above the industry's overall margin of 1.6 percent.

"We continue to dramatically outperform the competitors in our industry," Scanlon said.

With the strong performance in the title insurance business, Fidelity's earnings rose 64 percent in 2012 to $607 million, or $2.68 a share.

Also at Wednesday's meeting, Fidelity shareholders elected John Rood to the company's board of directors.

Rood is chairman of Jacksonville real estate development firm The Vestcor Companies Inc.

mbasch@baileypub.com

(904) 356-2466

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