A mega merger between two of the largest title insurance providers in the country has been terminated due to a complaint put forth by the Federal Trade Commission (FTC). The merger, in which Fidelity National Financial Inc. (FNF) would acquire $1.2 billion-worth Stewart Information Services, was announced in March of 2018. On September 6, the FTC filed an administrative complaint to block the move, citing concerns that it would “reduce competition in state markets.” Under agreement terms, FNF will pay Stewart $50 million for the termination.
“Competitive title insurance and title information markets are essential to providing Americans affordable and high-quality title insurance products,” said FTC Bureau of Competition Director Bruce Hoffman in statement regarding the block. “The merger threatens to continue a trend of consolidation in these markets. Our action seeks to preserve important and beneficial competition that plays out every day in every real estate transaction across the United States.”
The merger would have transitioned the “Big Four” title companies into the “Big Three,” creating concerns of a monopoly that significantly reduces competition. In order to pass, FNF and Stewart would have had to meet several regulatory conditions, including obtaining approval from the FTC and the New York Department of Financial Services, which also informed the companies that it did not approve of the merger (noted in SEC filings).
“The ‘Big 4,’ as they are known in the industry, have the financial strength, commercial expertise and national footprint to underwrite large commercial transactions with a liability amount in excess of $20 million,” read the FTC complaint. “On a national level, the Big 4 account for more than 85 percent of all title insurance sales, and after the merger, the combined Fidelity-Stewart would have more than 43 percent of sales nationwide.”
In light of the cancellation, Stewart is instead making changes to its executive leadership, promoting Frederick Eppinger from director to chief executive officer and assigning the role of president to Matthew Morris, who previously served as chief executive officer. Past President John Killea will continue on as general counsel and chief legal officer.
“While we were disappointed with the FTC’s decision regarding Stewart’s combination with Fidelity, we are well-positioned to execute on a standalone strategic plan built around growth and profitability,” said Thomas Apel, Stewart’s chairman of the board, in a statement. “The actions we have taken today are designed to enhance our strength, focus our company on the opportunities before us and build a leadership team with the best mix of experience and expertise to drive value creation. To further support the new direction, we will be actively reviewing the Board’s makeup to ensure the appropriate mix of diversity as well as operational and growth-oriented experience.
Liz Dominguez is RISMedia’s associate content editor. Email her your real estate news ideas at ldominguez@rismedia.com.
