Fidelity National Financial, Inc. (FNF) is offering no timetable for the completion of its proposed acquisition of Stewart Information Services Corp. for $50 per share of common stock.
Previously, FNF had stated it expected to close the deal during the first or second quarter of 2019. However, since the deal was announced in March 2018, the Federal Trade Commission (FTC) has continued to request information from both companies, the federal government endured its longest shutdown ever, and the New York State Department of Financial Services denied Fidelity’s application to acquire Stewart, citing concerns about competitive balance.
During a conference call Thursday with investors, analysts and journalists, Fidelity executives said they continued to work to provide the information requested by various regulators. However, Fidelity did not provide an updated target date for completion of the proposed deal, or address any concerns cited by state or federal regulators.
“With respect to the acquisition of Stewart Information Services, we continue to respond to the second request of the FTC,” Fidelity CEO Randy Quirk said. “We have also filed a new Form A application with the New York State Department of Financial Services, which disapproved a prior application to acquire control of Stewart Insurance Co.”
“We will continue to respond to the FTC’s second request and maintain discussions with all other relevant regulatory bodies to seek approval of the proposed acquisition,” Quirk added. “We remain confident that the Stewart acquisition will create meaningful long-term value for our shareholders.”
With a second-quarter closing appearing to be off the table, the soonest the acquisition may take place is September, some 18 months after the deal was first announced.
Fidelity Chief Financial Officer Anthony Park said the company’s holding company had $535 million of unregulated cash at the end of the first quarter, which bodes well for completing its proposed acquisition of Stewart if and when regulators give the go-ahead.
“We have the cash on the balance sheet available to cover the cash portion of the (Stewart acquisition),” Park said. “Over the course of 2019, we expect subsidiary dividends for the full year to be just under a billion dollars, call it about $950 million.”
The acquisition was originally valued at $1.2 billion, with 50 percent paid in cash and 50 percent in FNF stock. FNF said it planned to fund the deal with cash on hand and debt financing, in addition to issuing stock to Stewart shareholders, but the delays in closing have allowed FNF to pay the cash portion of the agreement without debt financing. If the delay continues, FNF could pay a larger portion of the acquisition with cash rather than stock.
For the first time, however, FNF discussed the potential of the deal not closing.
In the call with analysts in February, Chairman Bill Foley said the company was “not giving up. We’re going forward.” He added that FNF had until October to get approval from the FTC.
However, KBW analyst Bose George asked Thursday about potential changes for FNF’s cash holdings if the Stewart deal did not go through.
“I mean to the extent that it doesn’t happen, could you use a lot of that $900 million of expected cash at year-end just to buy back shares?” George asked.
“Absolutely that’s one of the options," Park said. “M&A is always a big part of our legacy and would continue to be so, whether it’s a Stewart acquisition or whether it’s other opportunities in the title insurance space, agents, larger agents or smaller underwriters or maybe other areas in the real estate related space and then buybacks. ... So I think all of those various areas would be on the table.”
In its earnings release, Stewart CEO Matt Morris echoed the work each company is doing with state and federal regulators.
“I remain thankful for the support and professionalism of our associates during the transaction process,” Morris said in a press release.