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Fidelity National Agrees to $1.2 Billion Deal for Stewart

Updated on
  • Company is expanding its presence in title-insurance market
  • Fidelity National will pay half in cash and half in stock

Fidelity National Financial Inc. agreed to buy Stewart Information Services Corp. for $1.2 billion to bolster its position in the title-insurance market.

The deal will be paid half in cash and half in Fidelity National common stock, the Jacksonville, Florida-based company said Monday in a statement. The buyer expects to fund the deal with a combination of cash on hand, debt and issuance of Fidelity stock to Stewart shareholders. Stewart surged on the news, climbing as much as 10 percent, its biggest intraday gain in four years, while Fidelity National rose as much as 8.4 percent.

Title insurers use records and public documents to verify that home sellers are the true property owners and that the property is free from liens. The companies collect a premium at the closing of a purchase, and pay costs that may arise from disputes about the new owner’s right to the property. Fidelity National has been expanding through deals, building its expertise in mortgage data with a 2014 deal to acquire Lender Processing Services Inc.

“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,” Fidelity National Financial Chairman William Foley said in the statement.

The deal could be a negative for consumers since it decreases the number of title insurers that homebuyers can choose, according to Greg McBride, chief financial analyst for personal-finance website Bankrate.com.

‘Fewer Choices’

“Any consolidation of market share is highly likely to produce higher costs and fewer choices for consumers,” McBride said Monday in a phone interview. “With greater market share comes greater pricing power.”

Fidelity National expects to complete the deal in the first or second quarter of 2019, according to the statement. If the companies need to divest assets or businesses with revenue from $75 million to $225 million in order to get regulatory approval, the buyer will lower the purchase price to a minimum of $45.50 per share.

Fidelity National’s purchase still faces some risks to closing, given the “likely required” divestitures, according to Barclays Plc analysts including Mark DeVries. Stewart was trading at $44.07 at 1:03 p.m. in New York, below both the $50-per-share price of the deal and the $45.50-per-share minimum price the buyer will pay should the combined company have to divest assets.

Still, the transaction offers benefits including at least $135 million in operational cost synergies, according to the statement. On previous deals, Fidelity National has been conservative about those targets and has often beaten those goals, the Barclays analysts wrote Monday in a note.

— With assistance by Joshua Fineman

(Updates with shares in second paragraph, comments from Bankrate and Barclays starting in fifth.)
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