NYSE-owner Intercontinental Exchange Inc (ICE) and Black Knight Inc agreed to sell one of the mortgage data vendor’s units to quell antitrust concerns, but said they would take the battle to court to save the deal, if necessary.
Black Knight’s Empower loan origination system unit, which helps mortgage lenders manage costs and reduce processing time for loan applications, will be sold to a unit of Canada’s Constellation Software Inc, the two companies said.
Black Knight’s shares rose 3.6%, while those of the exchange operator dipped 0.2%.
The companies also amended their deal terms to reduce the valuation of Black Knight to $11.7 billion, nearly 11% lower than the valuation it had fetched when the agreement was announced last year.
The deal has come under scrutiny from the Federal Trade Commission amid concerns from some U.S. lawmakers that the pricing power ICE would gain in the mortgage data market could lead to higher costs for consumers.
“ICE has committed to, among other things, litigate with the FTC, if necessary, to obtain approval of the merger,” it said.
U.S. antitrust regulators have taken a tough stance against corporate consolidation, waging battles against companies across industries including airlines, technology and finance.
“ICE’s commitment to litigate combined with the successful sale of Empower to a scale strategic buyer increases the likelihood of the merger closing, which more than offsets the lower merger consideration,” KBW analysts wrote in a note.
The divestiture will not be enough to assuage the FTC’s concerns but the quick sale to a large strategic buyer like Constellation Software should bolster the companies’ defense in a possible trial, the analysts said.
Last month, Reuters had reported the companies were planning to shed Empower.
Source: Reuters.com