In a classic example of a parent company cannibalizing its offspring, Fidelity National Financial Inc. (FNF), the largest provider of commercial and residential mortgage and diversified services in the U.S., plans to acquire Lender Processing Services Inc. (LPS) for about $2.9 billion, the companies revealed on Tuesday.
LPS was spun out of the financial data processing firm Fidelity National Information Services Inc. (FNIS) in 2008. FNIS was formed in 2006 as the result of the merger of an FNF unit and Certergy Inc.
As such, the deal brings LPS back under the umbrella of FNF.
‘We have significant experience and familiarity with LPS from our previous ownership of these businesses,’ said FNF Chairman William P. Foley II in a release. ‘This combination will create a larger, broader, more diversified and recurring revenue base for FNF.’
Foley said FNF is anticipating at least $100 million in cost synergies resulting from the deal. He said he is ‘confident that we can meet or exceed that goal.’
In the 50/50 cash/stock deal, FNF will pay $33.25 for each LPS share, representing a 1.1% premium over the May 24 closing price.
The purchase price represents a 19% and 25% premium, respectively, to the prior 30-day and 60-day average closing prices for LPS' common stock.
Providing the deal musters the usual regulatory and shareholder approvals, FNF will combine its ServiceLink business with LPS in a new consolidated holding company. It will then sell a 19% minority equity interest in this new holding company to buyout shop Thomas H. Lee Partners LP for approximately $381 million in cash. FNF will retain an 81% ownership interest in the new holding company.
Last week the Wall Street Journal reported that FNF and Thomas H. Lee Partners were in advanced talks to acquire LPS. The deal is expected to close in the fourth quarter of this year.