Fidelity National Financial Inc (FNF) Closes Lender Processing Services, Inc. (LPS) Deal

Yesterday, Fidelity National Financial Inc (NYSE:FNF) concluded the much awaited buyout of Lender Processing Services, Inc. (NYSE:LPS), on the stipulated date. The purchase consideration equated to $37.14 per share out of which $28.10 per share was paid in cash while the remaining $9.04 in Fidelity National shares. Therefore, the exchange ratio stood at 0.28742. In order to pay the stock component of the consideration, Fidelity will issue 25.9 million shares to the former Lender Processing shareholders.

Fidelity National Financial Inc (NYSE:FNF)

Concurrently, Moody’s Investors Service, the credit rating wing of Moody’s Corporation (NYSE:MCO), affirmed the “Baa3” debt ratings of Fidelity National Financial Inc (NYSE:FNF) and the “A3” insurance financial strength (IFS) ratings of its insurance subsidiaries, with a stable outlook. Moreover, the rating agency upped the debt rating on the 5.75% senior unsecured notes of Lender Processing Services, Inc. (NYSE:LPS) to “Baa3” from “Ba2”.

The rating affirmation came on the back of Fidelity National’s financial leverage maintained at low levels even after the culmination of the Lender Processing acquisition and addition of LPS debt.

In Dec 2013, this deal received all the necessary approvals – from the Federal Trade Commission (FTC) and the shareholders of Lender Processing. Following the completion of the deal, the ServiceLink business of Fidelity National Financial Inc (NYSE:FNF) will merge with Lender Processing Services, Inc. (NYSE:LPS) to form a new consolidated holding company. Fidelity National will retain an 81% stake in the new holding company and sell the remaining 19% for a cash consideration of $381 million to the funds associated with Thomas H. Lee Partners, L.P.

The combination of a leading insurer and a paramount data and analytics service provider is expected to create an entity that will prove accretive to the future earnings of Fidelity National Financial Inc (NYSE:FNF). The Zacks Consensus Estimate for 2014 is currently pegged at $2.01, representing a year-over-year improvement of 6.8%. Moreover, addition of Lender Processing Services, Inc. (NYSE:LPS) to its portfolio will ensure a diversified and recurring revenue base for Fidelity National.

Fidelity National Financial Inc (NYSE:FNF) currently carries a Zacks Rank #1 (Strong Buy). Among other players in the property and casualty insurance space, Allied World Assurance Co Holdings, AG. (NYSE:AWH), with the same Zacks Rank as Fidelity, looks promising.

Disclaimer: This article is written by Zacks Equity Research and originally published at Zacks.com.

ALLIED WORLD AS (AWH): Free Stock Analysis Report

FIDELITY NAT FI (FNF): Free Stock Analysis Report

LENDER PROC SVC (LPS): Free Stock Analysis Report

MOODYS CORP (MCO): Free Stock Analysis Report


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