Monday, March 19, 2018
Fidelity National Financial, Inc. (FNF) has signed a merger agreement to acquire Stewart Information Services Corp. for $1.2 billion in cash and stock. If approved by regulators and stockholders, Fidelity would pay $50 per share of common stock. The compensation would be paid 50 percent in cash and 50 percent in FNF common stock. FNF said the closing is expected in the first or second quarter of 2019. Under the terms of the transaction, Stewart stockholders will have the option to receive their consideration in all cash or all stock.
“We are excited to welcome Stewart, its employees and its customers to the FNF family,” said FNF Chairman William P. Foley, II said in a release announcing the acquisition. “The venerable Stewart brand has a long and respected history in the title insurance industry and we see tremendous potential in working with the Stewart management team to invest in and grow the Stewart brand on a national basis as part of our long-time, successful strategy of operating multiple title insurance brands under the FNF umbrella.”
“I am extremely proud of Stewart’s legacy of high-quality underwriting and customer-focused service delivered by our loyal associates,” Stewart CEO Matt Morris said. “This transaction with Fidelity is an opportunity to continue building on this legacy, enhance innovation and create a more robust company for the future.”
FNF holds the largest market share among title underwriters, according to third quarter data from the American Land Title Association. Fidelity is first at 33.4 percent of the market with First American second at 26.3 percent, Old Republic National Title is third at 14.8 percent and Stewart fourth at 10.6 percent.
FNF CEO Raymond Quirk said there are multiple areas where Fidelity can assist and accelerate Stewart’s growth plan. “We also believe there are significant operational efficiencies we can bring to bear by leveraging FNF’s shared services infrastructure that will provide meaningful long-term value creation opportunities for our shareholders,” Quirk said.
FNF said it expects to achieve at least $135 million in operational cost synergies and expects the acquisition to be at least 15 percent accretive to pro forma 2017 adjusted net earnings per share at that operational cost synergy target.
The merger agreement stipulates that the combined company would divest assets or businesses for which revenues exceed $75 million up to a cap of $225 million in order to achieve required regulatory approvals. That would adjust the purchase price to a minimum purchase price of $45.50 per share of common stock.
FNF said it plans to fund the $1.2 billion purchase price through a combination of cash on hand, debt financing, and the issuance of FNF common stock to Stewart stockholders.