Intercontinental Exchange (ICE) and Black Knight agreed to sell Black Knight’s product and pricing engine unit Optimal Blue business to a subsidiary of Canada’s Constellation Software in an effort to save the merger deal.
The $700 million proposed transaction includes a payment by Constellation of $200 million in cash, with the remainder financed by a $500 million promissory note issued by Constellation to Black Knight, as a subsidiary of ICE, at the closing of the transaction, the two companies announced Monday.
ICE and Black Knight entered into a divestiture agreement in connection with efforts to secure regulatory clearance of ICE’s proposed acquisition of Black Knight, a $13.1 billion mega-deal announced in May 2022.
ICE’s proposed acquisition of Black Knight remains under review by the Federal Trade Commission (FTC). Following the announcement of the deal, trade groups and lawmakers addressed antitrust concerns stemming from ICE becoming the largest mortgage services company in America.
The two companies have been finding ways to quell antitrust concerns. In March, ICE and Black Knight also agreed to sell Black Knight’s loan origination system Empower business – including its Exchange, LendingSpace and AIVA solutions – to a subsidiary of Constellation in March.
ICE and Black Knight also amended their deal terms to reduce the valuation of Black Knight to $11.8 billion, about 11% lower than the valuation when the agreement was announced last year.
The divestiture transaction of Optimal Blue is subject to the closing of ICE’s acquisition of Black Knight, the closing of Constellation’s acquisition of Black Knight’s Empower business and other customary closing conditions.
Analysts at investment banking firm Keefe, Bruyette & Woods (KBW) had said a divestiture of Black Knight’s Optimal Blue would be a feasible path to guarantee the merger deal with ICE earlier this month.
KBW pointed to Constellation being the “most natural suitor” as the buyer and the ideal window of timing to divest Optimal Blue would be in advance of the preliminary injunction hearing set to begin on July 24, KBW said in a note. In connection with the announcement, the FTC filed a joint motion with ICE and BKI to postpone the trial to August 14-16.
In April 2023, the FTC petitioned a California federal court to issue a temporary restraining order (TRO) and preliminary injunction (PI) that prevents ICE from going forward with the deal to buy Black Knight. The goal was to give the commission time to pursue in-house litigation against the merger.
The Federal District Court for the Northern District of California will rule on the preliminary injunction later this month.
If the merger goes through, it would be the second recent major mortgage deal for ICE, and would follow the acquisition of Ellie Mae from Thomas Bravo for $11 billion in 2020.
