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Fidelity National Financial To Buy Lender Processing Services In $2.9 Bln Deal

Fidelity National Financial To Buy Lender Processing Services In $2.9 Bln Deal
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Title insurer Fidelity National Financial, Inc. (FNF: Quote) agreed Tuesday to acquire mortgage servicing provider Lender Processing Services, Inc. (LPS: Quote) for $33.25 per common share in a cash and stock deal valued at about $2.9 billion. The deal, primarily subject to approval by shareholders of both companies, is currently expected to close in the fourth quarter of fiscal 2013.

"We are excited to welcome LPS and its market-leading technology and services to the FNF family. We have significant experience and familiarity with LPS from our previous ownership of these businesses. This combination will create a larger, broader, more diversified and recurring revenue base for FNF and makes us the nation's leading title insurance, mortgage technology and mortgage services provider," Fidelity National Chairman William Foley, II said in a statement.

The deal will bring the company back Lender Processing Services or LPS, under the ownership of its one-time parent Fidelity National Financial.

The company was spun off in 2008 from financial data processor Fidelity National Information Services Inc. (FIS), which was itself formed in 2006 by the merger of a subsidiary of Fidelity National Financial or FNF, and St. Petersburg, Florida-based Certegy, Inc.

Lender Processing Services provides services and technology to home lenders and servicers such as JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC)and Nationstar Mortgage Holdings, Inc. (NSM).

The offer price represents a 14 percent premium over LPS's closing share price of $29.11 on May 22, the last trading day before media reports emerged on the potential deal. It also represents a 19 and 25 percent premium, respectively, to the prior 30-day and 60-day average closing prices for LPS' common stock through May 22, 2013.

FNF said it will pay the total consideration for the LPS shares of common stock by 50 percent cash and 50 percent in shares of FNF common stock. FNF expects to issue about 57.4 million shares of FNF common stock to LPS common stockholders, representing about 20.151 percent of FNF.

Following the closure of the proposed deal, Jacksonville, Florida-based FNF will combine its ServiceLink business with LPS in a new consolidated holding company. FNF will then sell a 19 percent minority equity interest in the new holding company to private equity firm Thomas H. Lee Partners, L.P. for about $381 million in cash. FNF will retain a majority equity interest of 81 percent in the new holding company.

FNF anticipates meaningful synergies from the deal that can be generated by elimination of some corporate and public company costs and the shared corporate campus through the similar businesses in centralized refinance and default related products.

FNF targets $100 million in cost synergies, and is confident of meeting or exceed the goal. The deal is also 11.3 percent accretive to pro-forma 2012 net earnings, including the cost synergies. FNF further expects the deal to be meaningfully accretive to future earnings.

The terms of the deal provides for a 45-day "go-shop" period effective through July 7, 2013, during which LPS will actively solicit alternative superior acquisition proposals from third parties. It also provides for a break-up fee equal to approximately 1.25 percent of the total equity value of $2.9 billion payable to FNF if LPS terminates the deal after receiving a superior proposal during the "go-shop" period.

The terms of the deal also contains a break-up fee equal to about 2.5 percent of the total equity value if the deal does not go through for several other reasons.

FNF closed Friday's regular trading session at $26.18, up $0.49 on a volume of 4.18 million shares, and LPS closed at $32.99, up $0.43 on a volume of 2.64 million shares.

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by RTT Staff Writer

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