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ICE completes $11.9B acquisition of Black Knight 

Two firms will complete the divestiture of Black Knight's Empower business and Optimal Blue within 20 days

Intercontinental Exchange (ICE) completed its acquisition of Black Knight in a $11.9 billion deal that dragged on more than a year due to antitrust concerns. It’s now easily the biggest player in the mortgage tech space.

“Since our founding over 20 years ago, ICE has steadfastly adhered to our founding principle, demonstrated throughout our history, that applying technological innovation and digitization to traditionally analog businesses can make markets more efficient and transparent for all participants,” Jeffrey Sprecher, ICE’s founder, chair and CEO, said in a statement. 

“Our team is well-positioned and ready to apply our proven playbook across the U.S. mortgage ecosystem to help improve the homeownership experience for millions of American families.”

“The aggregate implied value of the Merger Consideration payable to the former holders of Black Knight Common Stock pursuant to the Merger was approximately $11.9 billion, including approximately $10.5 billion in cash and approximately 10.9 million shares of ICE Common Stock,” according to ICE’s 8-K filing with the Securities Exchange Commission (SEC) on Monday.

As agreed to by the Federal Trade Commission(FTC) last month, ICE and Black Knight will complete the divestiture of Black Knight’s loan origination system (LOS) Empower business and product and pricing engine unit Optimal Blue to a subsidiary of Constellation Software Inc. within 20 days after the acquisition.

ICE plans to hold a conference call with investors to discuss the acquisition on Sept. 28.

FTC accepted a binding settlement that both firms will divest Black Knight’s two businesses, settling FTC charges in March that ICE’s deal with Black Knight, which combines the two top mortgage technology providers, would drive up costs, reduce innovation and limit lenders’ choices for mortgage origination tools.

Under the agreement, ICE and Black Knight are required to seek approval from the FTC before acquiring any other businesses related to LOS or PPE for the next 10 years.

Both firms are prohibited from enforcing any non compete or non-solicit provision or agreement against any employee who seeks or obtains a position in the divested businesses.

Constellation would receive a license to resell with Empower certain other Black Knight mortgage-related products and services that would be acquired by ICE. A monitor will be appointed to oversee compliance with the proposed consent order.

ICE’s planned acquisition of Black Knight went through a bumpy road after the announcement was made in May 2022. 

In addition to both firms’ decision to sell Empower and Optimal Blue to address antitrust concerns, ICE and Black Knight amended their deal terms to reduce the valuation of Black Knight to $11.8 billion from $13 billion.

The deal announcement between ICE and Black Knight also stirred up strong opposition from some lawmakers and the Community Home Lenders of America (CHLA), which claimed the merger would affect the pricing of mortgage loans and mortgage servicing rights, especially at a time when affordability is being challenged. 

The CHLA stated opposition to the merger deal claiming that the settlement does not address its members’ concerns.

“CHLA continues to have ongoing concerns about ICE/Black Knight practices like one-way user seat charges, click/junk fees, and tying – which would be exacerbated by a now vertically integrated dominant LOS and servicing player, particularly since small lenders face significant risks in transitioning to any competitor,” the CHLA said in a statement on Tuesday.

According to the CHLA, ICE routinely engages in one-way pricing policies and contracts for so-called “user seats,” a volume-based charge based on the number of loan originators a lender has.

However, when the number of user seats significantly declined for most lenders in 2022, ICE kept user seat charges artificially inflated at the high-water mark, the CHLA said.

“If ICE is so non-responsive to such reasonable requests when they have every incentive to appear reasonable during the period in which the Black Knight purchase is being scrutinized, we ask what will happen if and after such a purchase is approved with no ongoing monitoring and enforcement authority,” the CHLA said in a letter to the to the CFPB and the FTC in August.

In light of ICE’s “dominant market strength,” member lenders have no choice but to accept click fees — which ICE charges each time the lender needs to access certain vendor information in the LOS process — as well as tying of add-on services and bundling products that lenders don’t want or need, according to the CHLA.

The Black Knight acquisition follows ICE’s 2020 acquisition of Ellie Mae, its 2019 acquisition of Simplifile, and its 2018 acquisition of Mortgage Electronic Registrations Systems (MERS), which together created the foundation of its ICE Mortgage Technology business segment. 

ICE’s shares were trading at $114.64 as of 4 pm ET, down from $115.81 per share at market open.

The article was updated with comments from the CHLA at around 4:20 pm ET.

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