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Jax Daily Record Monday, Dec. 12, 201612:00 PM EST

Fidelity's Bill Foley changes mind on Black Knight again

by: Mark Basch Contributing Writer

Almost three years after Fidelity National Financial Inc. reacquired the business that became Black Knight Financial Services Inc. and two years after Chairman Bill Foley said it was “unbelievable, really dumb” to let that business get away in the first place, Fidelity is giving it up again.

The company last week announced a plan to give up its majority interest in both Black Knight and another subsidiary, Fidelity National Financial Ventures (FNFV), making both of them independent public companies.

When the dust settles, there will be four independent public companies sprouted from the Fidelity family tree headquartered at the company’s Riverside Avenue office complex. Fidelity National Information Services Inc., or FIS, was spun off in 2006.

You just never know what’s going to happen at Fidelity, where Foley has orchestrated a flurry of deals to restructure the various businesses since the company moved its headquarters to Jacksonville in 2003.

As if Foley isn’t busy enough with his National Hockey League expansion franchise in Las Vegas, which he was awarded in June.

Fidelity moved to Jacksonville after acquiring a longtime mortgage processing technology company on Riverside Avenue, then owned by Alltel Corp. That business was originally known as Computer Power Inc. and has been the dominant company in its field.

Fidelity, mainly a title insurance company, merged the mortgage processing business with other financial technology businesses it owned to form FIS, and then spun that off as a separate public company.

Two years after that 2006 spin-off, FIS itself spun off the mortgage processing business into a separate public company called Lender Processing Services Inc., or LPS.

Fidelity bought back LPS in January 2014 and while Foley said “we’re not giving it back” after telling the Daily Record it was dumb to let it get away, the business renamed Black Knight went public with an initial offering in May 2015. However, Fidelity did retain a majority stake in Black Knight.

Just last month, Foley said Fidelity could not give up its remaining shares in Black Knight for at least a year because of debt repayment issues.

But last week, Fidelity announced the plan to give up those shares to try and lift the stock prices of all the companies involved.

“We think this spinoff is a catalyst for the stock, as FNF continues to trade at a material discount to its sum-of-the-parts valuation,” Janney Montgomery Scott analyst Ryan Byrnes said in a research note.

He estimated Fidelity, or FNF, was trading at a 10.7 percent discount to where the stock should be priced.

Besides helping Fidelity, Piper Jaffray analyst Jason Deleeuw said in a note that Black Knight “should also benefit from increased liquidity as about 83 million shares will become publicly owned.”

Deleeuw reiterated “overweight” ratings on both Fidelity and Black Knight after Wednesday’s announcement.

Besides Black Knight, Fidelity also is making its FNFV unit an independent public company. FNFV has been trading as a tracking stock representing Fidelity’s investments in non-title insurance business, including investments in several restaurant chains and human resources technology company Ceridian.

Fidelity will become purely a title insurance company after spinning off FNFV.

Fidelity has not announced any operational details for FNFV as a separate company, but completion of the spinoffs is not expected until the third quarter of 2017.

The Wednesday morning announcement did help FNF’s stock, which rose $1.56 to $34.22 that day. FNFV rose 20 cents to $13.65, but Black Knight fell 60 cents to $37.

FIS sells SunGard unit for $850 million

FIS also had a significant deal announcement last week.

A year after acquiring SunGard Data Services Inc., FIS agreed to sell SunGard’s unit that provides public sector and education technology solutions for $850 million.

The deal is no surprise. Back in March, Reuters news service reported FIS was trying to sell that business. However, the price may be a disappointment because Reuters said FIS was seeking more than $1 billion.

FIS Chief Executive Gary Norcross said in a news release the public sector and education business is performing well, but is not part of the company’s core business.

“This divestiture is consistent with our strategy to serve the financial services markets,” he said.

FIS is selling the business to investment firm Vista Equity Partners, which will operate the public sector segment as an independent company and merge the education segment into another company owned by Vista called PowerSchool.

FIS expects net cash proceeds of about $500 million from the sale, which it will use to pay off debt.

However, the deal will reduce FIS’ earnings. FIS said it expected earnings of 15 to 16 cents a share from the business in 2017.

Some of that lost income will be offset by interest savings as FIS reduces its debt.

Robert W. Baird analyst David Koning said in a research note that he will likely reduce his 2017 earnings estimate for FIS from $4.30 a share to $4.20 because of the sale.

Graham CEO ‘thrilled’ with WCWJ TV-17 deal

Despite its roots as a media company, officials of Graham Holdings Co. and its predecessor, The Washington Post Co., have a history of rarely commenting on the company’s operations.

Graham doesn’t hold quarterly conference calls, which is the norm for most public companies.

However, Graham made presentations at an annual December media company investor conference.

At last week’s event sponsored by UBS, Graham CEO Timothy O’Shaughnessy made what seemed to be his first public comments on the company’s pending acquisition of Jacksonville CW network affiliate WCWJ TV-17.

Graham already owns Jacksonville independent station WJXT TV-4, and the acquisition of a second local station is unusual for the company.

“Close followers of the company may note that I have generally stated we were unlikely to be an acquirer of additional stations at the multiples of the past several years,” O’Shaughnessy said, according to a transcript of his talk posted by Graham.

“While that philosophy has not changed, we did find a set of circumstances that we do not expect to find again and proved to be a compelling value,” he said.

Graham agreed to buy WCWJ and Roanoke, Va., station WSLS for $60 million in cash and the assumption of $60 million in pension obligations.

“Our ability to acquire both stations, as well as pension liabilities, created an outcome we are thrilled about,” O’Shaughnessy said.

Nexstar Broadcasting Group Inc. is selling the two stations to satisfy regulatory requirements as part of its pending acquisition of Media General Inc.

Graham and Nexstar announced the agreement in May and the companies are awaiting Federal Communications Commission approval before completing the deal.

Graham has not revealed any local programming plans for WCWJ, but said it will keep its network affiliation.

Graham owns four other stations in Orlando, Detroit, Houston and San Antonio.

WSJ sees Stein Mart stock rebound after sharp drop

A Wall Street Journal story last week suggested Stein Mart Inc. could be among the best performing stocks in January.

Stein Mart’s stock has dropped sharply since the abrupt resignation of CEO Dawn Robertson in September after just six months on the job.

According to the Journal story, Stein Mart’s losses could trigger tax-loss selling in December, as investors take losses on money-losing stocks before the end of the year to offset capital gains.

When the New Year begins and the tax-loss selling ends, those stocks tend to bounce back, the story said.

The story picked out four stocks in the S&P 1500 that “have the smallest market caps, lowest institutional ownerships and worst returns since midyear.”

Besides Stein Mart, the other three are Corvel Corp., Northern Oil & Gas and United Insurance Holdings.

Stein Mart’s stock dropped from $7.72 at midyear to about the $5 level recently.

ParkerVision adds 2 directors

Jacksonville-based ParkerVision Inc. last week added two directors, expanding the size of its board to nine members, seven of which are independent.

One of the new directors is Frank Newman, chairman of Promontory Financial Group China Ltd., who served as deputy secretary of the U.S. Treasury in 1994 and 1995.

The other is Paul Rosenbaum, CEO of SWR Corp., a private company that markets specialty industrial chemicals.

Michaels stock drops on sales and earnings misses

Michaels Cos. opened sharply lower Tuesday after reporting sales and earnings below expectations.

The Texas-based arts and crafts retailer, which has a distribution center in Jacksonville, reported adjusted earnings of 40 cents a share for the third quarter ended Oct. 29, 3 cents higher than last year but 3 cents lower than the average analyst’s forecast, according to Yahoo Finance.

Comparable-store sales (sales at stores opened for more than one year) fell 2 percent and while total sales rose 5 percent to $1.23 billion, that was lower than the average forecast of $1.28 billion.

Michaels’ stock opened $3.52 lower at $20.79 Tuesday morning after the earnings report, but it recovered to close the day at $23.85.

The company operated 1,221 Michaels stores, 112 Aaron Brothers stores and 35 Pat Catan’s stores at the end of the third quarter.

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