Lender Processing Services Inc.'s annual shareholders meeting Thursday morning opened on an unusual note.
By coincidence, the meeting was held just hours after the Wall Street Journal broke the story that Fidelity National Financial Inc. was in talks to reacquire LPS, which was spun off as an independent public company in 2008.
LPS President and Chief Executive Officer Hugh Harris didn't waste any time Thursday, starting the meeting by acknowledging that shareholders may have been reading news reports about the company that morning.
"LPS does not comment on rumors or speculation," Harris said. "That is all we'll be saying about this matter this morning."
Harris made no other comments during the brief meeting and did not give a report on the company's operations, as many CEOs do during the annual events.
He said later that it had nothing to do with the news reports, that he hadn't planned to give a report and that he hadn't given a report at last year's annual meeting either.
No shareholders, other than LPS employees, attended.
The Journal and other financial news services, citing unnamed sources, reported that Fidelity could announce an agreement next week to buy LPS for about $33 a share, a total of $2.9 billion.
They said investment firm Thomas H. Lee, which has partnered with Fidelity on several deals in the past, would buy 19.9 percent of LPS as part of the deal.
Fidelity CEO George Scanlon said Thursday morning by email that he couldn't comment.
LPS provides mortgage processing services for home lenders. The business grew out of a company started in Jacksonville in 1962 that has gone through several owners over the last half-century.
Fidelity acquired the business from Alltel Corp. in 2003 and liked its Jacksonville office site so much that it moved its corporate headquarters from California to Jacksonville.
Fidelity combined the mortgage processing business with other businesses it owned that provided technology services to banks, and it eventually spun that off into a separate company called Fidelity National Information Services Inc., or FIS, in 2006.
LPS was then spun off from FIS in 2008.
Fidelity National Financial, FIS and LPS all operate as independent public companies but all are headquartered at the same office complex along Riverside Avenue.
The LPS shareholder meeting Thursday was held in the same auditorium where Fidelity held its meeting Wednesday, and where FIS will hold its annual meeting next week.
LPS' stock closed at $29.11 Wednesday before the Journal story was posted online, so the $33 purchase price represents a 13 percent premium. Some analysts speculated Thursday that the proposed buyout price could be increased.
"We would expect some shareholders to push back on the deal price given the relatively modest premium to the current price," Sterne Agee & Leach analyst Greg Smith said in a research note.
Barclays Capital analyst Darrin Peller also thinks the price could rise, saying it looks like a good deal from Fidelity's point of view.
"We believe $33/share is easy to justify for any strategic or financial buyer and would suggest that a price higher than $33/share may be warranted," he said in his note.
Some investors agree, as LPS' stock traded as high as $33.40 Thursday morning before closing at $32.88
However, Kevin McVeigh of Macquarie Capital thinks LPS shareholders would get a fair deal at $33.
"Despite the modest 13 percent premium to Wednesday's close, we believe this potential deal would be a win for current LPS shareholders," McVeigh said in his note.
He said the "deal rescues shareholders from a pending fundamental slowdown. The timing of this deal would likely benefit shareholders as we believe fundamentals will likely deteriorate in the second half of 2013 as refinancing activity subsides and foreclosures continue to fall."
Fidelity shareholders also benefited from the merger talks, as its stock rose $1.38 to $25.75 Thursday.
Peller said the deal makes strategic sense for Fidelity.
"We believe FNF's management has been attempting to rebuild the mortgage servicing platform and recognized that LPS' MSP platform was difficult to build organically," Peller said.
"In addition, we suspect there may be accretive opportunities to merge the title businesses of the two companies," he said.
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