Fidelity National announces $2.9B deal to buy LPS
Fidelity National Financial Inc. announced a $2.9 billion deal this morning to buy Lender Processing Services Inc., reuniting the two Jacksonville-based companies that share headquarters space at an office complex along Riverside Avenue.
Fidelity will pay $33.25 a share to buy LPS and expects to pay half of the price in cash and the other half in Fidelity stock.
However, the exact amount of cash and stock may be adjusted, depending on the market price of Fidelity's stock and other factors before the deal is completed.
The agreement calls for Fidelity to merge LPS, which provides technology services for mortgage lenders, with a Fidelity subsidiary called ServiceLink, which also provides technology for home lenders.
Fidelity will then sell a 19 percent stake in the business to investment firm Thomas H. Lee Partners, L.P. for $381 million in cash.
The deal had been rumored for several days after the Wall Street Journal and other financial news services reported that negotiations were taking place.
The companies did not announce details on how the merger will affect operations, but Fidelity Chairman Bill Foley said in a news release that the company expects to cut $100 million in annual expenses after combining the businesses.
"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," he said.
Fidelity is the bigger company, with $7.2 billion in revenue last year, compared with $2 billion for LPS. However, LPS has far more employees in Jacksonville with 2,656, while Fidelity has about 800.
LPS grew out of a company started in Jacksonville in 1962, and it already had a major operation in Jacksonville when Fidelity originally acquired it from Alltel Corp. in 2003. Fidelity moved its corporate headquarters from California to Jacksonville after buying the mortgage technology business.
Fidelity later spun off its financial technology business into a separate company called Fidelity National Information Services Inc., or FIS, in 2006. FIS then spun off LPS as a separate public company in 2008.
All three companies have been operating as independent public companies, but they are all headquartered in the same Riverside Avenue complex.
"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," Foley said.
"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," LPS Chief Executive Hugh Harris said in the news release.
"The combined LPS and FNF offers comprehensive technology and services to address many of the challenges facing the industry today and the best solutions to support future success," he said.
The merger is subject to approval by shareholders of both companies. They hope to complete the deal in the fourth quarter this year.
Fidelity National Financial Inc.
Business: Title insurance, with investments in other businesses including restaurants and auto parts
CEO: George Scanlon
2012 revenue: $7.2 billion
Total employees: 60,000
Jacksonville employees: 800
Lender Processing Services Inc.
Business: Mortgage processing technology
CEO: Hugh Harris
2012 revenue: $2 billion
Total employees: 7,538
Jacksonville employees: 2,656