As the mortgage industry undergoes significant changes, a massive shakeup is on the horizon as software and analytics company, Black Knight, Inc., is slated for new ownership.
Intercontinental Exchange Inc. (ICE), a global provider of data, technology and market infrastructure, announced on May 4 that it entered into a definitive agreement to acquire the Jacksonville-based data and analytics company in a cash and stock transaction valued at $13.1 billion.
Both companies’ boards of directors have greenlit the acquisition, which is expected to close by the first quarter of 2023.
“Since our founding in 2000, ICE’s simple mission has been to make analog and opaque financial transactions more digital and transparent,” said Jeffrey C. Sprecher, founder, chair and CEO of Intercontinental Exchange.
According to Sprecher, the deal will catalyze the Atlanta-based company’s long standing goal of bringing an “end-to-end solution” to the evolving U.S. mortgage industry.
With roughly 6,500 employees, Black Knight has been a longstanding driver of innovation in the mortgage industry, according to ICE. Black Knight has provided an array of software, comprehensive data reports and analytics solutions that have served the real estate and lending industry for years.
Headquartered in Atlanta, ICE employs about 2,900 people and operates global exchanges—including the New York Stock Exchange—clearinghouses and provides mortgage technology, data and listing services.
The purchase of Black Knight will be the latest in a string of acquisitions that ICE has been making since 2016.
ICE announced a deal to buy Ellie Mae, a cloud-based platform that supports all aspects of mortgage origination, for $11 billion in August 2020. The company also spent $335 million for Simplifile in 2019 and acquired MERS, in which ICE took a majority stake in 2016 and bought outright in 2018.
Sprecher said during ICE’s latest investor call the combination of those transactions was meant to offer lenders the potential to shorten the time that they hold interest rate risk and market exposure.
Black Knight is an important piece of the financial market infrastructure that we believe will allow us to continue to reduce the cost of home borrowing when coupled with the other U.S. mortgage industry assets that we’ve built and acquired,” he said. “De-risking these markets for participants by shortening the duration when interest rate risks are held, making data more transparent to the risk holders and creating a more efficient hedging market should ultimately lower the cost for the entire market.”
Like with the previous transactions, the purchase of Black Knight is slated to support ICE’s growing mortgage technology business.
“The combination will result in improvements in the mortgage lending process for borrowers and lenders by increasing automation and efficiencies that lower the cost of obtaining a mortgage while harnessing data that can help current homeowners lower their monthly payments and lessen the likelihood of default,” ICE said in its statement.
The announcement comes at a time when many mortgage companies are attempting to adapt to a significant shift in the business environment, particularly the shrinking of the refinance originations. The decline from the frenzied business of the past two years has led several companies to downsize their workforce amid drops in production.
According to a statement by ICE’s CFO, Warren Gardiner, the transaction will be mutually beneficial for the companies and ICE shareholders.
“Black Knight’s high-growth, recurring revenue stream will further complement our ‘all weather’ business model, while the strength of ICE’s balance sheet and our combined cash flows position this transaction to be accretive to adjusted earnings per share in the first full year,” Gardiner said.
The acquisition will be financed with $10.5 billion in cash (80%) and a stock consideration valued at $2.6 billion (20%). Black Knight shareholders can elect to receive either cash or stock, subject to proration, with the value of the cash election and the stock election equalized at closing, ICE officials said.
Black Knight’s Chairman and CEO, Anthony M. Jabbour, echoed similar sentiments, adding that combining the two entities will be the next step in Black Knight’s journey to “transform the mortgage industry.”
“Black Knight and ICE share a common vision and commitment to deliver a better experience for our clients and the stakeholders we serve and to ultimately streamline the homeownership process,” Jabbour said. “By combining our expertise, we can deliver significant benefits to our clients and consumers by improving and streamlining the process of finding a home, as well as obtaining and managing a mortgage.”
