The regulatory problems will not hinder the purchase by the Intercontinental Exchange of Black Knight, said the analysts at Keefe, Bruyette and Woods after a discussion with the directors at Boston Consulting Group.
“The discussion reaffirmed our positive views regarding several aspects of the proposed transaction, including: 1) the transaction has a greater than 50% chance of closing despite a claims from the Federal Trade Commission; 2) Black Knight’s Empower loan policy will likely be eliminated, but must see more consumer demand, and 3) both parties remain committed to the deal,” the KBW report, dated January 19, said.
However, on Friday afternoon, an introduction to Alpha Finder A CTFN report said that both companies have been working with banks on possible withdrawals in order to obtain FTC approval of the transaction, which appears to have led to There was a huge increase in the price of Black Knight’s goods.
Before 2:30 a.m. Eastern on Friday, Black Knight was trading at $58.49 a share, after opening that morning at $58.61, according to Yahoo Finance. Within the next hour, it reached its high for the day at $60.55.
Boston Consulting Group representatives at the event were Micah Jindal, managing director, and David Lowman, senior consultant. KBW team Ryan Tomasello, who covers Black Knight, and Kyle Voigt, an investigator for ICE.
A survey of investors who attended the meeting found a 71% average chance of an FTC lawsuit and a 62% average chance of a successful closure, compared to the current market-show 25 %-to-35% chance the transaction will happen.
Because of the FTC’s “weak interest” in the deal, along with any uncertainty about the implications of Empower’s potential divestment, including if the deal could be done before a sale, the terminated by a table that cannot be closed in. The first half of ICE is 2023 time.
Furthermore, “BCG did not see much importance in the content or timing of Recent books by Maxine Waters to the FTC,” the report said. However, investors such as former CEO of the Mortgage Bankers Association David Stevens believe the letter could prompt the FTC it requires multiple eliminations other than Empower or stop altogether.
“Time is not on the side of the deal and I think the longer it takes the worse it will be,” Stevens said in December after the letter.
When the deal was announced last May, ICE officials said they had no plans to sell Empowerthe second most used LOS, because it serves a market other than its own Encompass, the Number 1.
Interestingly, Black Knight got a big win loanDepot will be integrated his special style, mello, and Empowerment.
On the service side, although ICE has not used a technological platform, the concerns expressed by people, including Mike Cagney, are its fintechs. Mirror Technology and Provence blockchain form a relationship with the Black Knight rival Sagent. In an opinion piece, Cagney compared the combination to the event Taylor Shift concert tickets a result of the Ticketmaster-Live Nation merger.
The panelists at the BCG panel came away feeling uneasy about the imminent threat to the MSP platform from Sagent.
“Healthy competition also bodes well for the FTC’s review of the merger (or the defense of ICE and the Black Knight in the merger in court),” the report said.
But the expectation that most mortgages will continue to decrease in 2023 is the biggest challenge that the parties need to solve.
“From a fundamental perspective, we came away with a negative feeling on the headwinds for Black Knight and ICE from the mortgage crisis, including the weak trading environment and early stock changes. and marketing services,” the report said. “BCG cited their forecast for $1.5 trillion of mortgage originations by 2023, below industry forecasts in the $1.7 trillion-$1.9 trillion range.”
The report came before Fannie Mae opened its sights in January for $1.64 trillion in 2023 mortgage production.