Mortgage technology company agrees to $1.8 billion deal for loan market firm.
Black Knight Inc.’s former parent company, Fidelity National Financial Inc., is known for its deal-making with a long history of acquisitions beyond its main business of title insurance.
As an independent company, Black Knight may be following a similar path, making deals beyond its main business of mortgage processing services.
Black Knight on July 27 announced a $1.8 billion deal to buy Optimal Blue, a digital marketplace that connects lenders and investors in the secondary mortgage market.
This follows Black Knight’s involvement last year in a $6.9 billion buyout of business data firm Dun & Bradstreet Holdings, Inc.
Black Knight was not the lead investor in that deal but after the acquisition, CEO Anthony Jabbour took on the additional role of chief executive of Dun & Bradstreet.
Dun & Bradstreet went public July 1, which was 16 months after the buyout, and Jabbour remains CEO of both companies.
It’s been a good investment for Black Knight, which continues to own 13% of Dun & Bradstreet’s stock after the initial public offering. One analyst last week said the market is undervaluing that stake.
In an upgrade report on Black Knight, analyst Ryan Tomasello with Keefe, Bruyette & Woods said the company’s investment in Dun & Bradstreet is worth $1.4 billion, or about $7.50 per Black Knight share. He believes shareholders will see a direct benefit.
“Following DNB’s successful July 1 IPO, we think it is likely that Black Knight will increase the narrative around its stake in DNB with 2Q earnings,” Tomasello said in his report.
“We believe a distribution of the shares to Black Knight shareholders is the most likely means of monetization,” he said.
Tomasello upgraded Black Knight from “market perform” to “outperform” and raised his price target on the stock from $74 to $84, with the stock trading at $72.86 at the time of his July 24 report.
In a follow-up report July 27, Tomasello said the Optimal Blue deal “seems an efficient use of excess capital” after Black Knight raised an additional $484 million last month with a secondary stock sale.
“While the deal valuation appears high and above Black Knight’s recent tuck-in acquisitions, we believe the company is paying up for a high quality, high-growth asset with attractive cross selling opportunities,” he said.
Black Knight plans to combine Optimal Blue with a subsidiary called Compass Analytics into a new company that will be 60% owned by Black Knight.
Cannae Holdings Inc., another company that was spun off from Fidelity, and private equity firm Thomas H. Lee Partners L.P. will be minority owners of the new entity.
Black Knight said it will offer more details about the Optimal Blue deal when it reports second-quarter earnings on Aug. 10.
Cannae CEO resigns from Black Knight board
Although they have separated from Fidelity, Black Knight and Cannae retain many close ties.
That includes the investment in Dun & Bradstreet, where Cannae was the lead investor in the deal.
However, the two companies separated one tie last week when Cannae CEO Richard Massey resigned from Black Knight’s board of directors.
Black Knight said in a Securities and Exchange Commission filing the resignation was not due to a disagreement with the company, but it gave no other details.
Analyst expects good FIS news
Fidelity National Information Services Inc., or FIS, reports its second-quarter earnings next week and at least one analyst is expecting good news.
“The bottom line is that while better than expected results are widely anticipated at this point given stale Street models and better recovery, we think the magnitude of the upside as well as 3Q commentary could surprise positively,” Raymond James analyst John Davis said in a research report.
“Additionally, we expect FIS and the group to outperform if spending growth reaccelerates in August after flattening out over the last month, as mask mandates result in the eventual decline in COVID-19 cases and Americans feel more comfortable going out again,” he said.
That of course would be good news for everyone, not just FIS stockholders.
Davis maintains a “strong buy” rating on FIS and increased his price target from $167 to $170, with the stock trading at $141.55 at the time of his July 20 report.
“Simply put, we recommend investors add to positions ahead of 2Q results as the stock is too inexpensive and we expect shares to re-rate higher on the back of a better 2Q print coupled with a potential reacceleration in spending growth,” he said.
Jacksonville-based FIS, like Black Knight and Las Vegas-based Cannae, also was spun off from Fidelity National Financial.
Regency Centers downgraded on mall uncertainty
Deutsche Bank analyst Derek Johnston downgraded Jacksonville-based Regency Centers Corp. ahead of its earnings report next week, saying there are “more unknowns than facts” for shopping centers.
“The forward growth outlook, in our view, has been sacrificed in the near term as Regency prudently works toward mitigating the mid- to longer-term disruption caused by the pandemic, while protecting their industry-leading balance sheet and financial flexibility,” Johnston said in his July 27 report.
“Despite above-average April and May (rent) collections of 68% and 58%, compliments of their 90% grocer/mass merchandiser anchored shops, we are taking a more cautious posture as the company’s high-quality portfolio, balance sheet and liquidity collides with a lower growth trajectory going forward,” he said.
Johnston downgraded Regency from “buy” to “hold.”
Stein Mart faces Nasdaq delisting
With continued quarterly losses, Jacksonville-based Stein Mart Inc. said it received a letter from Nasdaq on July 20 that it is not in compliance with minimum stockholders’ equity requirements.
As a result, the struggling fashion retailer could be delisted from the Nasdaq Capital Markets, Stein Mart said in an SEC filing.
After reporting a net loss of $65.7 million for the first quarter, Stein Mart reported a negative shareholders’ equity as of May 2.
Nasdaq gave Stein Mart 45 days, until Sept. 3, to submit a plan to regain compliance with the minimum stockholders’ equity standard.
Stein Mart already was facing the possibility of delisting because its stock price has been below the $1 minimum requirement since May 2019.
The company has a deadline of Sept. 18 to lift the stock price above $1 to regain compliance with that standard.
Tapestry CEO Zeitlin resigns
The CEO of Coach brand parent company Tapestry Inc. resigned after less than a year on the job, amid reports the company is investigating allegations of personal misconduct.
Jide Zeitlin was named CEO in September but resigned last week “for personal reasons,” the company said in a news release.
It gave no other details but several news organizations said Tapestry was investigating allegations that Zeitlin posed as a photographer to lure a woman into a romantic relationship more than 10 years ago.
“I felt compelled to resign today because I do not want to create a distraction for Tapestry, a company I care deeply about.” Zeitlin told The Wall Street Journal.
Tapestry operates lifestyle brands Coach, Kate Spade and Stuart Weitzman.
The New York-based company handles all of Coach’s North American distribution though an 850,000-square-foot facility at the Jacksonville International Tradeport in North Jacksonville.
Tapestry named Chief Financial Officer Joanne Crevoiserat as interim CEO as it searches for a permanent replacement.