Fidelity National Financial, Inc. (FNF) has announced it is acquiring Stewart Information Services Corporation, also known as “Stewart,” for $1.2 billion. Stewart is one of the leading title insurance companies in the country, providing residential and commercial title insurance, closing and settlement services, appraisal and valuation services and other offerings to the real estate industry.
“We are excited to welcome Stewart, its employees and its customers to the FNF family,” says William P. Foley, II, chairman of FNF. “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 longtime, successful strategy of operating multiple title insurance brands under the FNF umbrella.”
“We are very familiar with Stewart in the marketplace and see multiple areas where we can assist and accelerate Stewart’s growth plans,” says Raymond Quirk, CEO of FNF. “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.”
FNF is acquiring Stewart for $50 per share of common stock, subject to potential adjustment as described below, representing an equity value of approximately $1.2 billion. The consideration will be paid 50 percent in cash and 50 percent in FNF common stock. Stewart stockholders will also have the option to elect to receive their consideration in all cash or all stock, subject to pro rata reductions to the extent the cash or stock option is oversubscribed. The FNF common stock component will be subject to a fixed exchange ratio that is based on FNF’s volume weighted average price (“VWAP”) for the 20 trading days prior to the signing of the merger agreement. For those Stewart stockholders who elect to receive all FNF stock, the exchange ratio will be equal to 1.2850, subject to potential adjustment as described below and proration to the extent the stock option is oversubscribed.
FNF intends 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.
Under the terms of the merger agreement, if the combined company is required to divest assets or businesses for which revenues exceed $75 million up to a cap of $225 million in order to receive required regulatory approvals, the purchase price will be adjusted down on a pro-rata basis to a minimum purchase price of $45.50 per share of common stock.
FNF currently intends to fund the $1.2 billion purchase price through a combination of cash on hand at FNF, debt financing and the issuance of FNF common stock to Stewart stockholders. Including the assumption of $109 million of Stewart debt, pro forma debt to total capital is expected to be no more than approximately 20 percent at the close of the transaction.
The closing of the transaction is subject to certain closing conditions, including Stewart stockholder approval, federal and state regulatory approvals and the satisfaction of other customary closing conditions. Closing is expected in the first or second quarter of 2019.
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