Intercontinental Exchange, Inc. (ICE) [1]—a provider of data, technology, and market infrastructure—and Black Knight, Inc. [2], a software, data and analytics company that serves the housing finance continuum, have announced that ICE has completed its acquisition of Black Knight.
The Black Knight acquisition follows ICE’s 2020 acquisition of Ellie Mae, its 2019 acquisition of Simplifile, and its 2018 acquisition of Mortgage Electronic Registrations Systems (MERS), which together created the foundation of its ICE Mortgage Technology [3] business segment. ICE Mortgage Technology combines data and expertise to help automate the mortgage process, from consumer engagement through loan registration, and every step in between.
“Since our founding over 20 years ago, ICE has steadfastly adhered to our founding principle, demonstrated throughout our history, that applying technological innovation and digitization to traditionally analog businesses can make markets more efficient and transparent for all participants,” said Jeffrey C. Sprecher, ICE’s Founder, Chair and CEO [4]. “Our team is well-positioned and ready to apply our proven playbook across the U.S. mortgage ecosystem to help improve the homeownership experience for millions of American families.”
As previously announced, subject to the proration procedures specified in the Agreement and Plan of Merger entered into by ICE and Black Knight on May 4, 2022 and amended on March 7, 2023, Black Knight stockholders were entitled to elect to receive, in exchange for each issued and outstanding share of Black Knight common stock they owned:
- An amount in cash equal to the sum, rounded to the nearest one tenth of a cent, of (x) $68.00 plus (y) the product, rounded to the nearest one 10th of a cent, of 0.0682 multiplied by the average of the volume weighted averages of the trading prices of ICE common stock on the New York Stock Exchange on each of the 10 consecutive trading days ended on (and including) the trading day that was three trading days prior to the date on which the effective time of the acquisition occurred (the “Closing 10-Day Average ICE VWAP”); or
- A number of validly issued, fully paid and nonassessable shares of ICE common stock as is equal to the quotient, rounded to the nearest one ten thousandth, of (x) the Per Share Cash Consideration divided by (y) the Closing 10-Day Average ICE VWAP.
The elections of Black Knight stockholders are subject to proration in accordance with the terms of the Merger Agreement, which is applicable in the event one form of merger consideration is undersubscribed or oversubscribed. The Merger Agreement provides that the aggregate amount of cash consideration will equal $10,505,000,000. The total number of shares of Black Knight common stock that will convert into the right to receive the Per Share Cash Consideration will equal the quotient, rounded down to the nearest whole share, of the Cash Component divided by the Per Share Cash Consideration. All the remaining shares of Black Knight common stock not receiving the Per Share Cash Consideration will be converted into the right to receive the Per Share Stock Consideration.
As previously announced, the deadline for Black Knight stockholders to have made an election as to the form of consideration they wished to receive in connection with the acquisition was 5:00 p.m. on September 1, 2023. Based on the information available as of the election deadline, the preliminary results for the election of merger consideration were as follows:
- Holders of 61,205,562 shares of Black Knight common stock (which includes 13,982,224 shares that remain subject to guaranteed delivery procedures), or approximately 39% of the shares deemed outstanding for purposes of the election, elected to receive the Per Share Cash Consideration;
- Holders of 52,660,646 shares of Black Knight common stock (which includes 27,329,938 shares that remain subject to guaranteed delivery procedures), or approximately 34% of the shares deemed outstanding for purposes of the election, elected to receive the Per Share Stock Consideration; and
- Holders of 41,161,297 shares of Black Knight common stock, or approximately 27% of the shares deemed outstanding for purposes of the election, did not submit valid elections.
On August 31, the Federal Trade Commission (FTC) approved a proposed consent order [5] to resolve antitrust concerns surrounding ICE’s proposed acquisition of Black Knight. The proposed settlement ensures Black Knight’s divestiture of Empower and Optimal Blue. The FTC also secured other concessions to promote the success of the divested businesses. The proposed consent order [6] settles FTC charges that ICE’s deal with Black Knight, which combines the two top mortgage technology providers, would drive up costs, reduce innovation, and limit lenders’ choices for mortgage origination tools.
“This deal as originally structured would have reduced competition in key areas of the mortgage origination process, raising costs for lenders and homebuyers,” said Henry Liu, Director of the FTC’s Bureau of Competition [7]. “To address these concerns, the Commission’s order provides structural relief and a variety of tools to preserve competition in these critical markets.”
Under terms of the consent order, ICE and Black Knight are required, for the next 10 years, to seek prior approval from the FTC before either reacquiring any divested asset or acquiring an interest in a loan origination system business. The consent order [6] also requires the companies to provide prior notice to the FTC before acquiring an interest in a product, pricing, and eligibility engine (PPE) business for that same period.
The proposed consent order [6] contains additional requirements, including:
- Constellation would receive a license to resell with Empower certain other Black Knight mortgage-related products and services that would be acquired by ICE.
- For one year, ICE and Black Knight must facilitate Constellation’s hiring of certain employees not already included in the divestitures who have responsibilities for the divested products and businesses.
- ICE and Black Knight are prohibited from enforcing any noncompete or non-solicit provision or agreement against any employee who seeks or obtains a position in the divested businesses.
- ICE and Black Knight will transfer a promissory note used to finance Constellation’s purchase of the Optimal Blue business to a trustee, who will be responsible for selling the note within six months of the divestiture.
- A monitor will be appointed to oversee compliance with the proposed consent order.