In a move taken in hopes of appeasing federal antitrust regulators, Intercontinental Exchange Inc. (ICE) and Black Knight Inc. said on Tuesday they have reached an agreement to sell Black Knight’s Empower loan origination system (LOS) business to a subsidiary of Constellation Software Inc.
ICE, a global provider of data, technology, and market infrastructure, and Black Knight also announced they have amended the terms of their merger agreement, which was originally announced in May 2022. At that time, ICE said it had entered into a definitive agreement to acquire Black Knight, a software, data, and analytics company that serves the housing finance industry, including real estate data, mortgage lending, and servicing, as well as secondary markets.
Constellation Software, based in Toronto, Canada, acquires, manages, and builds vertical market software businesses.
Under the amended agreement, the sale of Empower is subject to ICE closing its acquisition of Black Knight, as well as to other "customary closing conditions," the companies said.
Divesting Empower is intended to help secure clearance of ICE’s proposed acquisition of Black Knight under the Hart-Scott Rodino Act, the company said.
Last month, Politico reported that federal regulators are expected to file a lawsuit opposing the acquisition.
According to the report, which cited three unnamed sources “with direct knowledge of the matter,” the Federal Trade Commission is expected to challenge the deal — originally valued at $13 billion — over concerns that by acquiring Black Knight, ICE would gain too much power in the U.S. mortgage market.
At the time the deal was announced, the companies said they expected it to close in the first half of this year.
The amended merger agreement values Black Knight at $75 per share, or a market value of $11.7 billion, down from the May 2022 valuation of $85 per share, or $13.1 billion. The amended deal also has consideration in the form of a mix of approximately $68 per share in cash and stock with an exchange ratio of 0.0682 based on ICE’s 10-day VWAP as of March 3, 2023, of $102.62, the companies said.
“As under the original terms, 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 the closing of the acquisition,” the companies said Tuesday.
ICE said it’s proposed acquisition of Black Knight remains under review by the FTC, and that the closing is subject to receiving the required regulatory approvals; approval of the amended merger agreement by Black Knight shareholders; and satisfying other customary closing conditions.
Along with amending the merger agreement, ICE has committed to, among other things, “litigate with the FTC, if necessary, to obtain approval of the merger,” the companies said.
Truist Securities Inc. served as lead financial advisor to Intercontinental Exchange and Black Knight for the sale of the Empower LOS.
