Title insurance company Fidelity National Financial (FNF) has agreed to acquire Stewart Information Services in a deal worth about $1.2bn.
As per the terms of the deal, Stewart shareholders will receive $25.00 in cash and 0.6425 common shares of Fidelity for each share of Stewart common stock they hold at closing.
Stewart is a key player in the insurance sector providing residential and commercial title insurance, closing and settlement services, appraisal and valuation services and other offerings to the real estate industry.
Stewart board chairman Thomas Apel said: “Last year, our Board initiated a review of strategic alternatives for the company, and after an extensive process, we determined that capitalizing on the Fidelity platform will best enable us to support the Stewart brand and continue providing the service our customers have come to expect.
“Combining with Fidelity National Financial will create a strong portfolio of customers and business relationships, and will provide us with the ability to grow the Stewart brand.”
FNF says that it intends to achieve at least $135m in operational cost synergies and expects that the acquisition to be at least 15% accretive to pro forma 2017 adjusted net earnings per share at that operational cost synergy target.
The company intends to fund this merger through a combination of cash on hand, debt financing and by issuing FNF common stock to Stewart shareholders. By taking into account the $109m of Stewart debt, pro format debt to total capital is expected to be not more than 20% at the close of the transaction.
FNF chairman William Foley, II said: "We are excited to welcome Stewart, its employees and its customers to the FNF family.
"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."
As per the merger agreement, if the combined company is required to divest assets or businesses for which revenues are more than $75m up to a cap of $225m, in order to receive the required regulatory approvals, the purchase price will be adjusted down on a pro-rata basis to a minimum purchase price of $45.5 per share of common stock.
The deal is expected to be completed during next year’s first or second quarter, subject to regulatory approval. As per the agreement, if the deal does not receive regulatory approval, or if it is not completed, Fidelity has to pay a reverse break-up fee of $50m to Stewart.
Image: Fidelity National Financial corporate headquarters in Jacksonville, Florida. Photo: Courtesy of Mathew105601/Wikipedia.org.