LPS buyout might have been different
Lender Processing Services Inc. might have been bought out last year by a group led by private equity firm Thomas H. Lee Partners L.P., with Fidelity National Financial Inc. participating as a minority partner, if not for continuing legal uncertainty over LPS' role in the nationwide foreclosure mess.
However, once those legal problems were resolved early this year, the buyout was revived with Fidelity taking over the lead role and Thomas H. Lee participating as the minority partner.
The parties reached an agreement for the buyout in May that will give LPS shareholders a combination of cash and Fidelity stock.
After a revision in June to the original agreement, Fidelity will end up owning 71 percent of LPS, with Thomas H. Lee owning the other 29 percent.
According to a proxy statement filed by the two Jacksonville-based companies, the combination of cash and Fidelity stock is valued at an estimated $32.70 per LPS share. The value will continue to fluctuate, based on the trading price of Fidelity's stock.
The proxy said that current LPS shareholders will end up owning about 14 percent of Fidelity's outstanding shares after the merger.
The story of how the merger came together is outlined in the proxy filed with the Securities and Exchange Commission just before the Labor Day weekend.
The buyout talks actually began in November 2011 when representatives of Thomas H. Lee contacted LPS Chief Executive Officer Hugh Harris.
The private equity firm was partnering with another unidentified "financial party" and with Fidelity in the potential deal.
The plan called for Fidelity to merge its ServiceLink subsidiary with LPS and become a minority partner. ServiceLink, like LPS, provides processing services to mortgage lenders.
The Thomas H. Lee-led group proposed a buyout in February 2012 for $26.50 per LPS share in cash. The offer was increased to $28 in April, consisting of $26 in cash and $2 in Fidelity stock, and was increased again in May 2012 to $27 in cash plus $2 in Fidelity stock.
The parties negotiated into the summer but called off the deal in August 2012, in large part because of "concerns around the legal and regulatory issues facing LPS," the proxy said.
LPS was facing legal action from federal and state authorities over allegations that one of its subsidiaries falsified documents used in foreclosure proceedings.
As LPS announced settlements of most of its foreclosure-related issues in early 2013, Fidelity's board of directors began discussing a possible buyout of LPS, with the participation of Thomas H. Lee but with Fidelity taking the lead.
On Jan. 31, Fidelity and Thomas H. Lee proposed a buyout for cash and Fidelity stock valued at $30 per LPS share.
After several months of negotiations, the parties reached a merger agreement on May 28 which had a value of $33.25 at the time.
According to the proxy, the merged company would have produced revenue of $9.1 billion last year and earnings from continuing operations of $593 million, or $2.25 a share.
In the first six months of this year, the combined company would have produced revenue of $5.2 billion and earnings of $254 million, or 95 cents a share.
Shareholders of both companies will have to approve the deal at special meetings on a date that has not yet been set. LPS shareholders have to approve the merger agreement, while Fidelity stockholders have to approve the issuance of new shares of stock to LPS shareholders.
Analyst upgrades Fidelity
Keefe, Bruyette & Woods analyst Bose George last week upgraded his rating on Fidelity, based on the outlook for its main business, title insurance.
George upgraded both Fidelity and competing title insurer First American Financial Corp. from "market perform" to "outperform." He said the upgrade was based on the long-term outlook for the companies.
"While the sector has underperformed in 2013 given concerns about slowing refinance volume, we expect the market to start looking more to longer-term earnings as a way to value the sector," George said in his research note.
"We expect earnings to trough in 2014 and grow strongly starting in 2015 driven by the ongoing recovery in the home purchase market. We also expect the valuation for the title insurers to trend towards the high end of the historical trading range since earnings driven by a strong purchase market should be far less volatile than current earnings, which are heavily refinance driven," he said.
George projects the LPS deal, expected to close by the end of the year, to add 35 cents a share in earnings for Fidelity this year. He estimates total 2013 earnings of $1.95 a share.
Fidelity's stock rose by 84 cents to $24.55 Tuesday after the upgrade. George increased his price target for the stock from $27 to $31.
Global Axcess shareholders likely to be wiped out in bankruptcy
Despite active trading in its stock, Global Axcess Corp. warned in an SEC filing last week that its shareholders will likely be wiped out in its Chapter 11 bankruptcy reorganization.
The Jacksonville-based company, which operates automated teller machine and DVD kiosk networks, filed for Chapter 11 last month.
The SEC filing said management "has noticed high trading volume in the company's common stock" since the bankruptcy filing.
"Stockholders of a company in Chapter 11 generally receive value only if all claims of the company's secured and unsecured creditors are fully satisfied. In this case, the company's management strongly believes that it is highly unlikely that all such claims will be fully satisfied. Accordingly, it is expected that the company's equity holders will experience a complete loss of their investment as a result of the company's Chapter 11 bankruptcy proceedings," it said.
Global Axcess' stock was trading at 4 cents a share when it filed for bankruptcy and while shares have continued to change hands over the past month, the trading price has been less than a penny.
Last week's SEC filing also said the company has reached an agreement to sell the assets of the DVD business for $325,000.
Global Axcess had previously announced a deal to sell the assets of its ATM business to a California-based company for about $10 million when it filed for bankruptcy.
Global Axcess listed $19.3 million in debts in its Chapter 11 filing.
The sales are subject to court approval.
Stein Mart sales up in August
Stein Mart Inc.'s sales trends continued to point up in August.
The Jacksonville-based fashion retailer reported total sales for the four weeks ended Aug. 31 rose 3.7 percent to $83.3 million, while comparable-store sales rose 3.8 percent.
Comparable-store sales are sales at stores open for more than one year and are a key indicator of a retailer's performance.
Stein Mart said sales were strongest in Florida and the Southeast, while sales in the Midwest and California were below the rest of the chain of 260 stores.
Stein Mart on Friday announced the official launch of its online store, where it will sell much of the merchandise that is also available in its stores as well as online-only offerings. The company expects the online store to add significantly to its sales.
"As we learn more and grow this business, we anticipate that this channel will rapidly become our largest flagship 'store,'" CEO Jay Stein said in a news release.
Shoe Carnival sales below forecast
Shoe Carnival Inc. does not provide monthly sales reports, but the footwear chain controlled by former Jacksonville Jaguars owner Wayne Weaver reported quarterly sales that were lower than analysts' forecasts.
Total sales for the second quarter ended Aug. 3 rose 18.8 percent to $216.4 million, with comparable-store sales rising 2.6 percent. However the average forecast of analysts surveyed by Thomson Financial called for sales of $219.2 million.
Second-quarter earnings of 15 cents a share matched the average forecast.
Shoe Carnival also projected third-quarter sales of $236 million to $240 million, with comparable-store sales rising by 1 percent to 2.5 percent. The average analysts' forecast was $241.5 million.
Projected third-quarter earnings of 51 cents to 55 cents are lower than the average forecast of 58 cents.
Sterne Agee analyst Sam Poser maintained his "buy" rating on the stock after the earnings report.
"While we were disappointed with top-line results, margins and expenses were managed well," Poser said in a research note.
Poser said he is also encouraged by Shoe Carnival's expansion. The chain, which currently operates 370 stores in 32 states, added 21 new stores and closed two in the first half of the fiscal year and plans to add 11 more while closing three in the next two quarters.
"We recognize the sensitive macro environment. However, we are confident that through an improved mix, the aforementioned efficiencies, and a broader footprint, Shoe Carnival will meet or exceed expectations over time," he said.
Weaver is chairman and the largest shareholder of Shoe Carnival. He and his wife, Delores, control 24.4 percent of the stock.
Parkway Properties expands with merger
Orlando-based Parkway Properties Inc. last week announced a merger with Los Angeles-based Thomas Properties Group Inc. in a stock swap valued at $1.2 billion.
The merger will add two office properties in Houston and five in Austin, Texas, to Parkway's portfolio, which currently consists of 46 properties in eight states.
This year, Parkway paid $130 million to acquire the Deerwood North and Deerwood South office parks in Jacksonville, consisting of eight buildings, from Flagler Development Co.
The company already owned two Jacksonville buildings near the Southbank, the Stein Mart building and Riverplace South. It also owns a 30 percent interest in 245 Riverside, which was originally known as the St. Joe building before The St. Joe Co. moved its headquarters to the Florida Panhandle.