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Massive title insurance merger: Fidelity National buying Stewart for $1.2 billion

A title insurance monolith is born

The title insurance world is about to get a whole lot smaller, as Fidelity National Financial is set to buy Stewart Information Services in a massive $1.2 billion deal.

Fidelity is already one of the nation’s largest title insurance and settlement services provider, and now, it’s set to acquire one of its biggest competitors.

Beyond being one of the biggest title insurance companies, Stewart also provides appraisal and valuation services and other offerings to the real estate industry.

The two companies announced the deal early Monday morning.

Under the terms of the deal, Stewart shareholders will receive $25 in cash and 0.6425 common shares of Fidelity for each Stewart share of Stewart they own.

According to Stewart, based on Fidelity’s stock price on the close of trading on March 16, 2018, each Stewart shareholder will receive a value of $50.20 per share, a 23% premium above Stewart’s closing price on that same date.

The company also said that the price Fidelity is paying represents a 32% premium to Stewart’s closing stock price on Nov. 3, 2017, which was the day before Stewart announced that it would undertake a review of “strategic alternatives” for the company’s future.

In a statement, Thomas Apel, Stewart’s chairman of the board, said that the Fidelity deal is the best of the “alternatives” for the company.

“Last year, our board initiated a review of strategic alternatives for the company, and after an extensive process, we determined that capitalizing on the Fidelity platform will best enable us to support the Stewart brand and continue providing the service our customers have come to expect,” Apel said. “Combining with Fidelity National Financial will create a strong portfolio of customers and business relationships, and will provide us with the ability to grow the Stewart brand.”

According to Fidelity National Chairman William Foley, Stewart will operate under the Fidelity umbrella, along with the company’s other title brands, which include Fidelity National Title, Chicago Title, Commonwealth Land Title, Alamo Title, and National Title of New York.

“We are excited to welcome Stewart, its employees and its customers to the FNF family,” Foley said. 

“The venerable Stewart brand has a long and respected history in the title insurance industry and 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,” Foley continued.

“We know business is won and lost based on customer service and relationships, and it is important to us to not only maintain, but provide additional support to grow the Stewart brand and reach more customers,” Foley added. “Through this transaction, Stewart will bring its experience, knowledge, and customer relationships to the Fidelity family of companies in our continued mission to be the industry leader in underwriting, customer service and operational expertise.”

In its release, Fidelity said that it expects to achieve at least $135 million in “operational cost synergies” from the deal.

“We are very familiar with Stewart in the marketplace and see multiple areas where we can assist and accelerate Stewart's growth plans,” said FNF CEO Raymond Quirk. “We also believe there are significant operational efficiencies we can bring to bear by leveraging FNF’s shared services infrastructure that will provide meaningful long-term value creation opportunities for our shareholders.”

The companies said that they will be “closely working with regulators to obtain the necessary approvals as soon as possible.” The companies currently expect the deal to close by the first or second quarter of 2019.

But, if the deal is not completed for failure to obtain the required regulatory approvals, Fidelity is required to pay Steward a reverse break-up fee of $50 million.

“I am extremely proud of Stewart’s legacy of high-quality underwriting and customer-focused service delivered by our loyal associates,” said Matt Morris, Stewart CEO. “This transaction with Fidelity is an opportunity to continue building on this legacy, enhance innovation and create a more robust company for the future.”

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