One of the country’s largest title insurance companies, Fidelity National Financial Inc (FNF), has signed an agreement to acquire Stewart Information Services, for $1.2 billion, Fidelity said in a statement on Monday.
Both the companies have signed a merger agreement for the acquisition, for $50 per share. FNF has said that the consideration will be paid half in cash and half in FNF common stock. Shareholders of Stewart Information will also have the option to select and receive their payment in all cash or all stock, subject to pro rata reductions in case the cash or stock options are oversubscribed.
FNF plans to fund the entire purchase price through a combination of cash, debt financing, and issuance of FNF common stock to Stewart shareholders. The deal includes the assumption of $109 million in Stewart’s debt.
As a title insurance company, Stewart provides residential and commercial title insurance, closing and settlement services, appraisal and valuation services, and other offerings to the real estate industry across the country.
“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,” said FNF Chairman William P. Foley, II in a statement.
Under the terms of the agreement, if the combined company is required to divest assets or businesses for which revenues exceed between $75 million and $225 million to receive required regulatory approvals, the purchase price will be adjusted down to a minimum purchase price of $45.50 per share of common stock.
FNF has said that it plans to achieve at least $135 million in operational cost synergies and expects the acquisition to be at least 15 percent gradual addition to its adjusted net earnings per share at that operational cost synergy target.
“We are very familiar with Stewart in the marketplace and see multiple areas where we can assist and accelerate Stewart's growth plans,” said Raymond Quirk, CEO at 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.”
The transaction is expected to close by the first or second quarter of 2019, subject to certain closing conditions including approval from Stewart’s stockholders.
FNF will host a call with investors and analysts to discuss the acquisition at 11.30 a.m. EST.