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With $11B Ellie Mae deal finalized, ICE prepares to unleash a “fully digital mortgage ecosystem”

Combined with MERS and Simplifile, ICE says it can fully digitize the lifespan of the mortgage process, from origination to close

Nearly one month after Ellie Mae announced that it had agreed to be acquired by Intercontinental Exchange, ICE announced Friday that it had received regulatory approval and fully completed its $11 billion acquisition.

“We are excited to begin the next important chapter in our journey to digitize the residential mortgage industry,” said Jeff Sprecher, founder, chairman and CEO of Intercontinental Exchange. “Ellie Mae’s industry leadership and best-of-breed technology will better enable us to further accelerate the automation of the mortgage origination workflow, which will benefit stakeholders across the production chain, including consumers.”

Per the announcement, the transaction values Ellie Mae at an enterprise value of $11 billion – three times the all-cash transaction of $3.7 billion private equity shop Thoma Bravo spent acquiring it a little over a year ago.

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

ICE has been a serious player in the mortgage tech space over the last five years, particular with M&A. The company acquired a majority equity position in MERSCORP Holdings, the owner of Mortgage Electronic Registration System in 2016, and purchased the remaining stake two years later. ICE also acquired Simplifile in 2019 for $335 million.

By adding Ellie Mae to Simplifile and MERS, Sprecher believes he has put together the holy trinity of services to fully digitize the mortgage process. Sprecher’s firm says the old-school, paper-laden process takes two months or more to complete, costs $8,000 and features a cast of characters and a physical room. With ICE’s suite of products, he claims it could cost $2,600, feature an “e-closing table,” and be completed in just a couple weeks, he recently told Fortune.

“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,” Ellie Mae’s president and CEO Jonathan Corr said in a statement.

ICE reported it expects the Ellie Mae transaction to contribute the following to its third quarter 2020 results:

  • Revenue of $67 million to $72 million
  • Interest expense of $11 million to $12 million
  • Approximately 5 million weighted average diluted shares outstanding, which are expected to result in total weighed average diluted shares outstanding of 551 million to 554 million.

It’s adjusted operating expenses, which excludes the amortization of acquisition-related intangibles related to the Ellie Mae acquisition, is estimated to be between $34 million and $36 million.

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