Intercontinental Exchange Inc. won’t complete a buyout of Jacksonville-based Black Knight Inc. by midyear, as the two companies had hoped.
However, some optimism remains the $11.7 billion deal could eventually be done despite objections from the U.S. Federal Trade Commission.
The FTC filed an administrative complaint March 9 to block the deal, citing its potential anticompetitive impact on the mortgage technology market.
Wall Street greeted the news with a tepid response, showing some traders are still betting on the companies working out an agreement to satisfy the antitrust concerns.
Black Knight’s stock only fell $1.59 to $59.42 on March 9, not too far below the $68-a-share value of the agreement.
Stephens analyst John Campbell said in a research note the FTC’s complaint was expected.
“With ICE providing public assurance that it intends to litigate and Empower (main competitive overlap issue) already finding a suitor, we like the chances for this deal to ultimately cross the finish line,” Campbell said.
Two days before the FTC action, Black Knight and ICE announced an agreement to sell Black Knight’s mortgage loan origination software platform, called Empower.
ICE has the largest mortgage loan origination system in the market and Empower is second, and the companies hoped the sale would satisfy the FTC.
The FTC’s administrative complaint expressed concern about the merger’s impact on the mortgage origination software market but did not mention the agreement to sell Empower.
The complaint expressed additional concerns about ancillary services offered by Black Knight and ICE to mortgage lender clients, particularly product pricing and eligibility services known as PPE.
“A PPE is software that allows a lender to identify potential loan rates for a borrower, determine the borrower’s eligibility for a given loan, and lock in the loan’s terms for the borrower,” the complaint said.
It said Black Knight’s PPE system called Optimal Blue is the largest in the market and ICE has the second largest, so a merger of those systems is another antitrust issue.
The complaint said an evidentiary hearing on the deal is scheduled July 12 before an administrative law judge of the FTC.
ICE responded to the complaint by announcing March 9 it “strongly disagrees with, and will vigorously oppose” the FTC’s challenge of the deal.
Black Knight CEO Joe Nackashi sent an email to employees, disclosed in a Securities and Exchange Commission filing, telling them to remain focused on their work as the process plays out.
“Since announcing the proposed acquisition, ICE has identified several areas where the combination of our two companies would benefit consumers and the mortgage industry,” the email said.
“We believe in the merits of our case and we will work with ICE to present our position in court,” it said.
“In the meantime, the companies will continue to work toward closing the acquisition, which is now expected in the third or fourth quarter.”
Treace jumps on revenue growth
Treace Medical Concepts Inc.’s stock jumped higher March 8 after the Ponte Vedra-based company reported strong revenue gains in 2022 and forecast continued growth this year.
Treace Medical, which offers a surgical procedure to treat bunions, said revenue rose 49% to $49.8 million in the fourth quarter and rose 50% to $141.8 million for the full year.
The company is projecting 2023 revenue of $187 million to $193 million.
“We are experiencing significant momentum in all aspects of our business and have developed a specialized and scalable business model that we believe will allow us to continue to advance our growth strategy,” CEO John Treace said in the company’s conference call with analysts.
Treace said the company’s market penetration in the fourth quarter reached 5.5% of the estimated 450,000 annual bunion surgical procedures in the U.S., up from 3.8% in the fourth quarter of 2022.
Treace Medical reported a net loss of $42.8 million in 2022 and analysts project losses to continue for at least the next two years, but they are impressed by the company’s growth prospects.
J.P. Morgan analyst Robbie Marcus, who maintains an “overweight” rating on Treace Medical, said fourth-quarter revenue and the 2023 outlook were ahead of analysts’ forecasts.
“While management struck a very bullish tone with the guidance to back it up, we still think the current range leaves room for outperformance as the company continues rolling out new ancillary products,” Marcus said in a research note.
Morgan Stanley analyst Drew Ranieri also sees room for upside in the company’s forecasts and maintained an “overweight” rating.
“We continue to see Treace Medical as an attractive high-growth asset,” Ranieri said in his note.
Treace Medical’s stock rose 4.27% to $24.50 on March 8 after the report.
FRP results rise, reversing loss
FRP Holdings Inc. reported stronger earnings in the fourth quarter, as the Jacksonville-based real estate developer redeploys cash from major property sales five years ago.
The company reported fourth-quarter earnings of $2.8 million, or 29 cents a share, reversing a loss in the previous year which included a large amortization expense.
FRP develops properties mainly in Washington, D.C., and surrounding markets.
It sold off most of its operating properties in 2018 and has been reinvesting the proceeds in new projects.
“Financially, in 2022, we saw meaningful increases across all operating segments, with every segment having its biggest year for revenue, operating profit and NOI since the asset sale in 2018,” Chief Financial Officer John Baker III said in FRP’s March 7 conference call.
“Most importantly, we’re now on track to diligently and deliberately put all of our cash and cash equivalents to work. The next 10 to 15 years are going to transform this company,” he said.
Paysafe earnings fall as revenue up
Paysafe Ltd., the London-based company opening a North American headquarters in Jacksonville, reported higher revenue but lower earnings in the fourth quarter.
Revenue rose 8%, adjusted for foreign exchange transactions, to $383.6 million but adjusted earnings fell 37% to $33.1 million, or 54 cents a share.
Paysafe provides services in payment processing, digital wallet and online cash transactions.
The company announced its plans in November to open an office in Jacksonville that will employ 600.
The company did not address the North American headquarters in its March 9 earnings report.
It has U.S. offices in Atlanta, Miami, Houston, Tampa/Clearwater, Nevada and two in California.