The Deal: Fidelity National Jumps on FTC Approval for Lender Processing

NEW YORK (TheStreet) -- The Federal Trade Commission this week cleared the $2.9 billion acquisition of Lender Processing Services  (LPS) by Fidelity National Financial  (FNF) with conditions.

On Thursday, Fidelity National was gaining 1% to $33.26 while Lender Processing was little changed at $37.61.

The FTC determined that the combination of Fidelity, of Jacksonville, Fla., and Lender Processing, also based in Jacksonville, would likely substantially lessen competition in several local markets in Oregon.

Fidelity provides mortgage services and is the largest title insurance underwriter in the U.S. Lender Processing operates in two segments, technology, data, and analytics; and transaction services. Its technology, data, and analytics segment offers software and information systems for processing mortgages. The transaction services segment offers outsourced processing of settlement, default management and title agency services.

Regarding its antitrust review of the merger, the FTC said that to preserve competition a proposed settlement requires Fidelity to sell a copy of Lender Processing's title plants in six Oregon counties and an ownership interest equivalent to Lender Processing's share of a jointly owned title plant in the Portland, Oregon, metropolitan area.

Title plants are databases used by abstractors, title insurers, title insurance agents and others to determine the title status of real property.

According to the FTC's complaint, the proposed combination otherwise is likely to substantially lessen competition, in violation of U.S. antitrust laws, the relevant markets where Oregon law requires title insurers to own an interest in a title plant in counties where they issue policies, which creates a barrier to entry for new providers of title insurance underwriting. The merger would eliminate one of only a few available title plants in six Oregon counties, making it possible for Fidelity and only one other underwriter to exclude competing firms from having an interest in a joint title plant in the Portland metropolitan area.

The consent order requires Fidelity to sell a copy of Lender Processing's title plants serving the Oregon counties of Clatsop, Columbia, Coos, Josephine, Polk and Tillamook within five months of the deal close, as well as an ownership interest in the Portland area to an FTC-approved buyer within the same period.

The commission vote on the consent order was 3-1, with Commissioner Joshua D. Wright voting no. The commission issued a separate statement and Commissioner Wright issued a dissenting statement. In his dissent, Wright determined that there was insufficient evidence to show that the merger would lessen competition for title information services in the Oregon markets.

The May 28 merger agreement, as amended, calls for Fidelity National to issue Lender Processing shareholders 0.20197 of a Fidelity National shares and $28.10 in cash. The deal is also subject to a collar such that if based on a 10-day pricing period ending on the third day before the deal close, Fidelity National average over $26.76 then Lending Processing shareholders would receive additional shares under the original stock exchange ratio of 0.65224 to make up that difference in price.

--by Scott Stuart in New York

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