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Intercontinental Exchange to acquire Ellie Mae from Thoma Bravo for $11 billion

Thoma Bravo acquired the company for $3.7 billion 15 months ago

Ellie Mae announced Thursday it entered a definitive agreement to be acquired by Intercontinental Exchange for approximately $11 billion. The move comes 15 months after Thoma Bravo, a private equity investment firm, announced it would acquire Ellie Mae in an all-cash transaction of $3.7 billion.

“We are excited to be joining the Intercontinental Exchange family and having the opportunity to work closely with Simplifile and MERS in helping our industry to realize the true digital mortgage,” said Jonathan Corr, president and CEO of Ellie Mae. “We have been on a journey, as we have long said, ‘to automate everything automatable’ for the mortgage industry, and joining ICE, which has followed a parallel journey in global exchanges, will allow us to further accelerate realizing our vision.”

ICE’s decision to acquire Ellie Mae follows the company’s actions over the last four years to strengthen its hold in the residential mortgage industry. 

In 2016, ICE announced it acquired a majority equity position in MERSCORP Holdings, the owner of Mortgage Electronic Registrations Systems, collectively known as MERS. Two years later, ICE purchased the remaining stake in the company for an undisclosed sum.

Then, in 2019, ICE announced it acquired Simplifile for $335 million, a move that ICE stated “establishes ICE, through its growing ICE Mortgage Services network, as the leading provider of end-to-end electronic workflow solutions serving the evolving U.S. residential mortgage industry.”

“Twenty years after we founded Intercontinental Exchange to provide a transparent trading platform for the energy industry, and following two decades of providing continued innovation to help customers navigate global markets, we are pleased to announce the acquisition of Ellie Mae, which will help us similarly transform the mortgage marketplace,” said Jeffrey C. Sprecher, founder, chairman and CEO of Intercontinental Exchange. “Our planned acquisition represents a one-of-a-kind opportunity to add an extraordinary enterprise with great leadership to our family.” 

“It will also enhance ICE’s growth strategy in mortgage technology, with complementary products and a wide array of customers and stakeholders who will benefit from our core and proven expertise in operating networks and marketplaces,” Sprecher said. 

According to the announcement, the transaction values Ellie Mae at an enterprise value of $11 billion, with consideration in the form of a mix of cash (84% of EV) and newly issued shares of ICE common stock (16%).

Thoma Bravo acquired the company in an all-cash transaction of $3.7 billion, which means ICE purchased the company for three times more than it sold for a little over a year ago. 

According to the Thoma Bravo agreement, shareholders received $99 per share in cash. 

On the conference call about the acquisition, an ICE spokesperson commented on the increased valuation, stating that what Ellie Mae traded for 18 months ago has nothing to do with what they think it’s worth today. “We think what it’s worth today is all about where we think it can go and with that growth comes really solid incremental margins,” they said, adding that they think Ellie Mae is a business that can grow 8% to 10% a year, every year, for the next decade.

“We partnered with Jonathan Corr, Joe Tyrrell and the Ellie Mae team to advance their vision to automate the residential mortgage industry while also using Thoma Bravo’s deep software expertise to greatly improve the company’s operations and accelerate growth,” said Holden Spaht, a managing partner at Thoma Bravo. “We are confident that being part of ICE will enable Ellie Mae to continue transforming an industry still in the early innings of digitization, and we look forward to following Ellie Mae’s continued success as part of ICE for many years to come.”

Based in Pleasanton, Calif., Ellie Mae has approximately 1,700 employees and was founded in 1997 with a mission to automate and digitize the trillion-dollar residential mortgage industry. 

According to the announcement, Ellie Mae provides technology services to all participants in the mortgage supply chain, including its over 3,000 customers and thousands of partners and investors participating on their open network who provide liquidity to the market. 

The acquisition is expected to close in the third or fourth quarter of 2020.

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