The Basch Report: Second snag slows Fidelity’s Stewart deal

Jacksonville-based Fidelity says the merger of the two title companies was delayed by the federal government shutdown.

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  • | 4:10 a.m. February 21, 2019
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Fidelity National Financial Inc. three weeks ago revealed one snag that’s slowing its acquisition of Stewart Information Services Corp.: a rejection of the merger application by a New York state regulator.

But during its quarterly conference call with analysts last week, Jacksonville-based Fidelity said the merger of the two title insurance companies hit a second hurdle in January: the federal government shutdown.

The Federal Trade Commission is continuing its antitrust review of the deal, which would increase Fidelity’s dominant share of the U.S. title insurance market to 42 percent.

“Unfortunately, the FTC informed us that no work related to the regulatory review occurred during the recent roughly monthlong government shutdown,” Fidelity Chairman Bill Foley said during the conference call.

Fidelity and Stewart announced the $1.2 billion merger nearly a year ago, in March 2018.

“We knew it would take a long time,” Foley said.

“We’re a little frustrated and it’s tedious, but we’re not giving up. We’re going on. We’re going forward.”

The New York State Department of Financial Services disapproved Fidelity’s application to buy Stewart’s New York title insurance subsidiary in January. Foley said he hopes the company can work out the state regulator’s concerns.

“We can certainly sit down with them and talk about alternatives, which could include a number of different paths which I’d prefer not to go into because we’re still evaluating different alternatives,” he said.

Fidelity already received 28 state approvals before the New York department rejected it, and Foley said it won’t stop the deal.

“One state is not going to slow this thing down. It just isn’t going to happen,” he said.

Fidelity reported adjusted fourth-quarter earnings of 63 cents a share, 3 cents higher than the previous year. However, the earnings were 5 cents lower than the consensus forecast of analysts surveyed by Zacks Investment Services.

Fidelity’s stock fell by 91 cents to $35.52 last Thursday after the earnings report.

FIS, Black Knight beat forecasts

Two Jacksonville-based companies spun off from Fidelity reported fourth-quarter earnings last week that beat analysts’ forecasts.

Fidelity National Information Services Inc., or FIS, reported adjusted earnings of $1.60 a share, up from $1.24 in the fourth quarter of 2017 and 2 cents higher than Zacks’ consensus forecast.

Black Knight Inc.’s adjusted earnings of 50 cents a share were 13 cents higher than the previous year and 3 cents above Zacks’ consensus forecast.

Black Knight provides technology services to mortgage lenders and FIS provides other technology for financial institutions. During their conference calls, analysts asked both companies about the impact of the planned merger of SunTrust Banks Inc. and BB&T Corp. on their businesses.

FIS Chief Executive Gary Norcross said the company modeled “a very consistent level of industry consolidation” into its 2019 forecasts.

“It’s very hard to predict when these announcements are going to occur. It’s very hard to predict what the impact could be, both positive and negative,” he said.

SunTrust and BB&T are clients of Black Knight and both have “a lot of focus on technology in general,” Black Knight CEO Anthony Jabbour said.

“We think it fits well with our innovations that we brought to market and we’re going to continue to bring to market and I think directionally where we’re heading is in the same line of direction as they are,” he said.

Rayonier AM misses forecasts

Rayonier Advanced Materials Inc. reported adjusted fourth-quarter earnings of 19 cents a share, down from 50 cents in the fourth quarter of 2017.

The earnings were 18 cents below the consensus forecast of analysts, Zacks said.

Jacksonville-based Rayonier AM’s stock fell $1.22 to $13.75 last Thursday after the report.

The maker of cellulose specialties products will provide an update on its outlook at an Investor Day presentation March 7 in New York.

Regency Centers remains optimistic about retail

Jacksonville-based shopping center developer Regency Centers Corp. continues to deal with retailers going out of business but during its conference call last week, CEO Hap Stein said there are plenty of well-run retailers remaining to fill up mall spaces.

“There have been and always will continue to be tenant failures, and the key is to try to align yourself with the better best-in-class operators,” Stein said.

“We feel good about our ability and good about tenant demand and our ability to maintain occupancy in the 95 to 96 percent range and average 3 percent-plus growth (in net operating income) over the long term,” he said.

Regency’s portfolio of 425 properties across the country was 95.6 percent leased at year-end.

The portfolio includes one Sears and two Kmart locations but company officials are optimistic they can find new tenants to replace those stores that will pay higher rents. 

Sears Holdings Corp., parent of both Sears and Kmart, is reorganizing under Chapter 11 bankruptcy laws.

Regency reported funds from operation (basically earnings excluding noncash charges) of 98 cents a share in the fourth quarter, up from 94 cents the previous year.

Regency also said it is raising its quarterly cash dividend by 3 cents a share to 58.5 cents.

GEE Group earnings fall

GEE Group Inc. last week reported income from operations of $19,000 for its first quarter ended Dec. 31, down from $1.5 million the previous year.

The Jacksonville-based staffing services company said revenue fell 15 percent in the quarter to $38.5 million.

The company said revenue fell in part because of a plan to close underperforming offices. Severe winter weather in some markets and the holidays falling in the middle of the week also impacted results, it said.

“GEE’s strategy for the remainder of this fiscal year includes the selective addition of sales and delivery talent, in addition to beefing up our recruiting capabilities to help us continue to gain market share and increase GEE Group’s organic revenue growth and profitability,” CEO Derek Dewan said in a news release.

“We plan to bolster our balance sheet and continue to evaluate and make strategic acquisitions that are complementary to our business, which will be accretive to earnings while adding extensively to our service delivery network.”

Northrop-St. Augustine wins $16.9 million contract

The U.S. Department of Defense said last week Northrop Grumman Corp. was awarded a $16.9 million contract modification by the U.S. Naval Air Warfare Systems Command for aircraft depot maintenance services.

The Defense Department said 96 percent of the work on the contract will be done at Northrop’s St. Augustine facility, which is the largest corporate employer in St. Johns County with more than 1,000 workers.

The work will be done on the F-5N/F aircraft.

Marker officially moves its HQ to Houston

Marker Therapeutics Inc., formerly known as TapImmune, officially relocated its headquarters from Jacksonville to Houston, the company said last week.

The company, formed by a merger last year, previously announced it would move its main office to Texas because of a partnership with the Baylor College of Medicine.

TapImmune moved its headquarters from Seattle to Jacksonville in 2015 when it began trials of a breast cancer treatment at Mayo Clinic.

Marker said in a news release last week that “certain personnel will continue to operate in proximity to major academic and clinical partners in the Jacksonville location.”

The company, which has several cancer treatments in development, has had a minimal number of employees while headquartered in Jacksonville.