Atlanta based Intercontinental Exchange announced on May 4th it has entered into a definitive agreement to acquire Black Knight, Inc., a software, data and analytics company that serves the housing finance continuum, including real estate data, mortgage lending and servicing, as well as the secondary markets. The cash and stock transaction values Black Knight at $85 per share, or a market value of $13.1 billion, and builds on ICE’s position as a provider of end-to-end electronic workflow solutions for the rapidly evolving U.S. residential mortgage industry.
The definitive agreement has been unanimously approved by the Boards of Directors of both companies.
Black Knight, based in Jacksonville, Florida, has approximately 6,500 employees and is a long-time driver of innovation in the mortgage industry. The company provides a comprehensive and integrated ecosystem of software, data, and analytics solutions serving the real estate and housing finance markets. The Black Knight ecosystem adds value for clients of all sizes across the mortgage and real estate lifecycles by helping organizations lower costs, increase efficiencies, grow their businesses, and reduce risk.
The addition of Black Knight’s technology solutions, real estate and mortgage-related data assets, leading analytics, and its team of mortgage and technology professionals complements and strengthens ICE’s rapidly growing mortgage technology business. The combination will result in improvements in the mortgage lending process for borrowers and lenders by increasing automation and efficiencies that lower the cost of obtaining a mortgage, while harnessing data that can help current homeowners lower their monthly payments and lessen the likelihood of default.
“Since our founding in 2000, ICE’s simple mission has been to make analog and opaque financial transactions more digital and transparent, beginning with commodity markets, extending across a large array of asset classes, and most recently working to help streamline the mortgage industry,” said Jeffrey C. Sprecher, Founder, Chair and CEO of Intercontinental Exchange. “Black Knight shares our passion for leveraging technology to serve customers and households, and, with our expertise in operating networks and marketplaces, our planned acquisition will bring to life a true end-to-end solution for the mortgage manufacturing and servicing ecosystem, benefitting aspiring and current homeowners across the United States.”
"Black Knight has been on a successful journey to transform the mortgage industry by providing our clients with powerful, interconnected solutions that help them achieve greater efficiency and better serve their customers,” said Anthony M. Jabbour, Chairman and CEO of Black Knight, Inc. “We believe this combination is the right next step in that journey. Black Knight and ICE share a common vision and commitment to deliver a better experience for our clients and the stakeholders we serve, and to ultimately streamline the homeownership process. By combining our expertise, we can deliver significant benefits to our clients and consumers by improving and streamlining the process of finding a home, as well as obtaining and managing a mortgage.”
“This transaction will benefit ICE, Black Knight, and our collective shareholders,” said Warren Gardiner, Chief Financial Officer of Intercontinental Exchange. “Black Knight’s high-growth, recurring revenue stream will further complement our 'all weather' business model, while the strength of ICE’s balance sheet, and our combined cash flows, position this transaction to be accretive to adjusted earnings per share1 in the first full year.”
The transaction is expected to close in the first half of 2023, following the receipt of regulatory approvals, Black Knight stockholder approval, and the satisfaction of customary closing conditions.
Transaction valued at $85 per share, or a total market value of $13.1 billion, with consideration in the form of a mix of cash (80%) and stock (20%).
Cash consideration of $10.5 billion expected to be funded with newly issued debt and cash on hand at the time of close.
Stock consideration valued at approximately $2.6 billon based on ICE 10-day VWAP as of May 2, 2022 of $118.09.
Black Knight shareholders can elect to receive either cash or stock, subject to proration, with the value of the cash election and the stock election equalized at closing.
Enterprise value of approximately $16 billion represents ~15x fully synergized 2022 Black Knight adjusted EBITDA2.
Expect to realize cost synergies of $200 million, with one-third realized by year one, two-thirds by year three, and full synergies realized by year five.
Expect to realize revenue synergies, net of related costs, of approximately $125 million by year five.
Expected Black Knight transaction IRR of 10% .
Expect that the acquisition of Black Knight will be accretive to adjusted EPS1 in the first full year post-close.
Transaction expected to close in the first half of 2023, subject to satisfaction of customary conditions including receipt of Black Knight stockholder approval and Hart-Scott-Rodino (HSR) review and clearance.
Goldman Sachs and Co., LLC and Wells Fargo Securities, LLC are serving as lead financial advisors to Intercontinental Exchange, and Shearman & Sterling LLP and Morgan Lewis & Bockius LLP are serving as legal advisors to Intercontinental Exchange. J.P. Morgan Securities LLC is serving as the exclusive financial advisor to Black Knight and Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Black Knight.
Adjusted earnings per share (EPS) excludes amortization of acquisition-related intangibles, acquisition and integration expenses and the impact of equity earnings from unconsolidated investees, net of tax.
2022 adjusted EBITDA represents the midpoint of Black Knight’s FY22 adjusted EBITDA guidance range of $786 million to $803 million, burdened for stock-based compensation and adjusted for full synergies of $325 million.