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- 2013 - December - 30th -

Fidelity clears last hurdle to LPS acquisition

By Mark Basch, Contributing Writer

Fidelity National Financial Inc. cleared its last hurdle before acquiring Lender Processing Services Inc. when the Federal Trade Commission signed off on the deal on Christmas Eve.

The two Jacksonville-based companies expect to complete the transaction Thursday.

The FTC did impose conditions with its approval. The agency is requiring the merged company to sell off LPS' title plant assets in several communities in Oregon.

"These divestitures are designed to counteract the likely anticompetitive effects of the transaction, while preserving any efficiencies that might arise from the combination of Fidelity and LPS," the FTC said in a news release.

Fidelity's main business is title insurance. LPS provides a wide range of processing services for mortgage lenders and its subsidiaries include a company called National Title Insurance of New York Inc.

The proxy statement sent to LPS shareholders for the merger shows that LPS took in $166 million in title insurance premium revenue in the first half of this year. The company had $940 million in total revenue in that period.

Fidelity had more than $2 billion in title insurance premium revenue in the first six months of the year, with $4.3 billion in total revenue.

Title plants are databases used to determine the title status of a property. According to the FTC, Oregon law requires title insurance firms to own an interest in a title plant in each county in which they do business.

"This requirement creates a barrier to entry for new firms seeking to provide title insurance underwriting. The proposed acquisition would eliminate one of only a few available title plants in six Oregon counties, and make it possible for Fidelity and only one other underwriter to exclude competing firms from having an interest in a joint title plant in the Portland metropolitan area," the FTC said.

So, it is requiring Fidelity to divest the title plant assets to preserve competition in those markets.

There were no other required divestitures in the FTC's approval of the deal.

"This approval was the last milestone to achieve our scheduled January 2, 2014, closing date and we look forward to welcoming the LPS businesses to the FNF family," Fidelity Chairman Bill Foley said in a news release.

FIS paying more for 2010 deal

The other leg of the triumvirate of public companies headquartered in the Riverside Avenue office complex, Fidelity National Information Services Inc., announced it is paying a lot more money for a 2010 acquisition.

Fidelity National Information Services, or FIS, said in a Securities and Exchange Commission filing that it is increasing the payment to the former owners of Capco, a global business and technology consulting firm acquired by FIS three years ago.

The original agreement called for FIS to pay $292 million in 2010 plus additional money based on Capco's projected performance in 2013 through 2015.

Robert W. Baird analyst David Koning said in a research note that the additional sum was estimated at $114 million at the time of the deal.

In the SEC filing, FIS said it has now agreed to pay $219 million for the 2013-15 period.

The higher payment is "based on management's outlook and increased projections of Capco's future results in light of its consistently improving performance," the filing said.

Because of the payment and some changes to a Capco employee payment plan, FIS will incur a charge of about $94 million in the fourth quarter. Analysts have been projecting FIS will earn between $222 million and $238 million in the quarter.

Koning said he regarded the news as "an immaterial event, but interesting."

FIS was spun off from Fidelity National Financial in 2006, and LPS was spun off from FIS in 2008.

Moody's looks at EverBank's servicing

As EverBank Financial Corp. sells off a chunk of its mortgage servicing business to Green Tree Servicing LLC, Moody's Investors Service last week said it is reviewing its rating on EverBank's servicing capabilities for a possible downgrade.

"The action is due to concerns about a possible decline in servicing performance that may result from the downsizing of EverBank's default platform and significant reduction in staff," Moody's said in a news release.

EverBank in October agreed to sell off the rights to service some mortgage loans with a higher delinquency profile to Green Tree. As part of that deal, 500 EverBank jobs are being transferred to Green Tree, and EverBank said three weeks ago that it is eliminating another 194 jobs because of the deal.

EverBank is also cutting 108 jobs because of a decline in mortgage origination activity.

According to Moody's, EverBank's mortgage servicing division will be reduced to about 350 employees handling 250,000 loans with an unpaid principal balance of about $40 billion. Moody's wants to see how the reduced staff handles the workload.

"We will continue to monitor EverBank's servicing performance throughout and after the completion of the transaction, and take action as appropriate," the ratings agency said.

Michaels again plans IPO

Arts and crafts retailer Michaels Stores, which was taken private in 2006 and aborted an initial public offering plan last year, is trying to go public again.

The Irving, Texas-based company, which has its largest distribution center in Jacksonville, reorganized into a new holding company called The Michaels Companies Inc. and plans to sell up to $500 million in stock, according to its SEC filing.

The company, with 1,137 Michaels and 122 Aaron Brothers stores, said in the filing that it is the largest arts and craft retailer in North America.

Michaels operates seven distribution centers, including a 776,000-square-foot facility in Jacksonville that is the company's biggest, according to the IPO filing.

JAXUSA Partnership data shows the company employs 250 people at the facility.

The company was publicly traded before a $6 billion buyout in 2006 by private equity firms Blackstone Group LLC and Bain Capital LLC.

Michaels filed plans to go public again in March 2012 under the name Michaels Stores Inc., but those plans were put on hold in April 2012 when CEO John Menzer suffered a stroke.

Menzer resigned from the company in July 2012 and was succeeded in February 2013 by Carl Rubin, who previously was CEO of Ulta Beauty.

Michaels reported earnings rose 15.8 percent in the nine months ended Nov. 2 to $110 million.

Sales rose 4.5 percent to $3.015 billion, with comparable-store sales (sales at stores open for more than one year) up 2.1 percent.

Another Lone Star company going public

Another company with local ties also filed for an IPO last week.

Continental Building Products Inc., a Virginia-based manufacturer of gypsum wallboard and complementary finishing products, filed plans to sell up to $200 million in stock in its IPO.

The company was formed in July by Lone Star Funds when the Dallas-based private equity firm acquired France-based Lafarge's North American gypsum business.

Lone Star is the same firm that owns the Jacksonville-based Winn-Dixie and Bi-Lo supermarket chains.

That company filed plans in September for an IPO of its own under the name Southeastern Grocers Inc.

Continental Building Products operates three drywall plants, including one in Palatka. The other two are in Kentucky and upstate New York.

The company reported sales of $288 million in the first nine months of the year.

Just like the planned Southeastern Grocers IPO, Lone Star intends to maintain a controlling interest in Continental Building Products after the stock

sale. However, the SEC filing does not specify how much of the company will be retained by Lone Star.

Continental Building Products expects to trade on the New York Stock Exchange under the ticker symbol "CBPX."

Tanker company calls off IPO

One company with Jacksonville ties called off an IPO last week after agreeing to a buyout instead.

Pennsylvania-based American Petroleum Tankers Partners LP, which operates a fleet of oil tankers, filed for an IPO in October. However, American Petroleum Tankers and a related company, State Class Tankers, agreed to a $962 million acquisition by pipeline transportation company Kinder Morgan Energy Partners LP.

Both American Petroleum Tankers and State Class Tankers are owned by Blackstone and Cerebus Capital Management.

According to its IPO documents, most of American Petroleum Tankers' shore-based operations are done through vessel managers located in Jacksonville and Seattle.

American Petroleum Tankers reported revenue of $73.4 million in the first nine months of the year.

Gannett completes Belo deal

Gannett Co. Inc. last week nearly doubled its broadcast television portfolio last week by completing the acquisition of Belo Corp.

Before the merger, Gannett owned 23 U.S. television stations, including NBC affiliate WTLV TV-12 and ABC affiliate WJXX TV-25 in Jacksonville.

Belo owned 20 stations but as a condition to getting regulatory approval for the merger, Gannett agreed to sell off one station in St. Louis and two in Phoenix to Meredith Corp. Gannett still operates stations in both of those markets.

With the acquisition, Gannett said it now reaches about one-third of all U.S. television households.

mbasch@baileypub.com

(904) 356-2466

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