Intercontinental Exchange has deepened its push into the US housing market data business, striking the largest deal in its history by agreeing to purchase mortgage software company Black Knight for $13.1bn.
Atlanta-based ICE on Wednesday said it would pay $85 per share for the company, a roughly 35 per cent premium on Black Knight’s trading price before the deal was announced. The $10.5bn cash portion will be funded by newly issued debt as well as cash on hand.
Shares in Black Knight jumped 14.5 per cent on the news while ICE, best known as the owner of the New York Stock Exchange, fell 4 per cent.
ICE’s move strengthens its grip on the data and software that undergirds the US residential mortgage market at a time when home prices have been soaring.
Less than two years ago it bought mortgage software provider Ellie Mae for $11bn from private equity group Thoma Bravo, which was then ICE’s largest purchase since chief executive Jeffrey Sprecher founded it in 2000 as an energy trading platform.
The purchase also marked a decisive pivot away from ICE’s mainstay as the owner of some of the world’s biggest stock and futures exchanges, clearing houses and index providers. Mortgage technology accounted for a fifth of ICE’s $7.1bn in total revenue last year.
Black Knight provides data on areas including bankruptcy and loan servicing to lenders. The deal gives the Florida-based company a $16bn enterprise value.
The purchase would make it easier for borrowers and lenders to agree mortgages, while helping homeowners lower their monthly payments and lessening the likelihood of default, ICE said.
Sprecher added that Black Knight fitted into his company’s long-term strategy of turning old-line financial services into lucrative high-tech operations. “ICE’s simple mission has been to make analogue and opaque financial transactions more digital and transparent,” he said.
Through a string of acquisitions, ICE has transformed into one of the world’s largest exchanges. It bought the Chicago Stock Exchange in 2018, Interactive Data Corp for $5.2bn in 2015 and NYSE Euronext for $11bn in 2013.
The Black Knight deal is expected to provide $200mn worth of cost synergies over five years and to close in 2023 pending regulatory approval.