It was late in 2008 that the Big Five in title became the Big Four. As the Big Four is set to become the Big Three following the announcement of Fidelity National Financial’s (FNF) buyout of Stewart Information Services Corp., it is worth looking back to the last major deal that shook the title landscape.
In early April 2007, the storm brewing around LandAmerica Financial Group seemed as far away as you could imagine. The company’s stock reached an all-time high April 4 after Keefe Bruyette & Woods analyst Nat Otis raised his price target on the company to $84 a share. The stock peaked that day at a record $78.82 a share and eventually would rise as high as $108.92 in June 2007.
But a week after Otis’ note helped send the market soaring, the first sign of trouble came. LandAmerica issued a $21 million write down in its Lender Services segment when one of its tax and flood processing customers – Freemont General Corp. – was ordered to stop doing business by the Federal Deposit Insurance Corp.
“We were disappointed with this development in our Lender Services business,” Chairman and CEO Theodore L. Chandler Jr. said at the time. “We remain focused on initiatives to improve return on equity even if the real estate environment does not improve.”
The financial crisis was just beginning, though, as was LandAmerica’s troubles. The company began staff cuts in mid-2007, and by the second quarter of 2008, the company had dropped 3,600 employees – or a quarter of its entire staff – and 54 production centers.
Bear Stearns’ collapse into bankruptcy in March 2008 was the first sign of the global trouble to come. By the time Lehman Brothers filed for bankruptcy in September 2008, the crisis had enveloped LandAmerica. The company’s stock was down to $12.85 a share on Oct. 9, 2008, and a Morningstar report appeared to predict the worst to come.
“We think it’s going to be a long, cold winter for title companies,” the company said, according to a story from The Title Report.
In November the news finally came that LandAmerica agreed to sell to FNF after posting a $599 million loss in the third quarter that left the company on the verge of bankruptcy. The deal was set to push FNF’s market share over 46 percent, Demotech estimated at the time, with cost synergies of at least $150 million – similar to the $135 million in savings FNF expects to gain from buying Stewart.
To make the deal work, LandAmerica had to divest itself of its holdings in Centennial Bank, and among the immediate concerns was the future of LandAmerica staff.
At the time, FNF Chairman William Foley said, “We intend to take the best from both companies.”
In a conference call Monday with analysts to discuss the acquisition of Stewart, Foley – still chairman at FNF a decade later – said, “We’re going to pick the best of breed from both companies.”
The deal could not prevent LandAmerica from filing for bankruptcy, though – a major difference between the deal FNF closed a decade ago and the one in which it plans to buy Stewart now. The bankruptcy filing allowed FNF to buy the underwriters Commonwealth Land Title Insurance Co., Lawyers Title Insurance Corp. and United without having to take on the heavy debt load which was sinking LandAmerica at the time.
However, as it turned out, FNF was not the only bidder for LandAmerica after the bankruptcy filing. Stewart also was interested in buying the firm. But FNF was able to close the acquisition of LandAmerica on Dec. 22, 2008. Stewart withdrew its offer to buy Commonwealth Land Title Insurance Co. and Lawyers Title Insurance Corp., and FNF bought the underwriters for $282 million. The move through bankruptcy kept FNF from assuming more than $500 million of debt from LandAmerica and put FNF’s market share at 46 percent, with First American at 29 percent.
Today, the deal to buy Stewart would put FNF at 44 percent of the market, with First American at 26 percent and Old Republic at 15 percent.
The deal did come with difficulties for title agents. In January, a month after the deal closed, The Title Report wrote about “significant closures” to Commonwealth and Lawyers offices in California, with other closures around the country. That did provide an opportunity for regional underwriters, though, with Agents National Title Insurance CEO David Townsend saying at the time that agents who wrote for both Fidelity and LandAmerica would be shopping for options.
Who could stand to gain this time around? According to the latest data from the American Land Title Association, Westcor is the fifth-largest company by market share, with 3.5 percent of the overall market. WFG (2.5 percent), Title Resources Guaranty (2.2 percent), NATIC (1.7 percent), Alliant (0.8 percent), Investors Title (0.8 percent), CATIC (0.7 percent) and First National Title (0.7 percent) are next among the independent companies.