Exclusive-Black Knight to shed unit in bid to save $13 billion sale to ICE -sources By Reuters

By David French

(Reuters) – Mortgage data vendor Black Knight (NYSE:) Inc has decided to put its Empower loan origination software business up for sale in an effort to overcome U.S. antitrust concerns over its $13.1 billion proposed acquisition by Intercontinental Exchange (NYSE:) Inc, people familiar with the matter said.

ICE’s takeover of Black Knight would follow its $11 billion purchase of Ellie Mae, another mortgage software company, in 2020.

The Federal Trade Commission (FTC) has been scrutinizing the Black Knight deal for months amid concerns from some U.S. lawmakers that the pricing power ICE would gain in the mortgage data market that lenders rely on could lead to higher costs for consumers.

The uncertainty is reflected in Black Knight’s share price. It has been hovering around $60, a deep discount to the roughly $83 per share current value of the cash-and-stock deal with ICE.

Black Knight has hired Truist Financial (NYSE:) Corp to help it explore a sale of Empower and has been soliciting the interest of potential buyers including private equity firms, the sources said. ICE provided its consent to Black Knight going ahead with the move, the sources added.

Empower could be valued at around $400 million, according to one of the sources.

It could not be learned if Black Knight is carrying out the sale process for Empower in co-ordination with the FTC.

The sources requested anonymity because the matter is confidential. ICE and the FTC declined comment. Black Knight and Truist did not respond to requests for comment.

It is unclear whether a divestment of Empower would be sufficient to allay any FTC antitrust concerns. Holly Vedova, director of the FTC’s Bureau of Competition, said in a speech last week, without addressing the Black Knight deal specifically, that the agency was not inclined to approve mergers on the basis of divestitures.

“A review of academic research on the adequacy of proposed remedies reveals concern and skepticism over efforts to fix – rather than block – anticompetitive mergers,” Vedova said.

Empower would account for only a small slice of ICE’s potential mortgage origination software capacity. However, Empower and ICE’s Encompass unit are the top two vendors for loan origination software, jointly controlling upwards of 60% of the market, according to the Community Home Lenders Association, an industry group which has lobbied against the Black Knight deal.

The deal has received a so-called “second request” from the FTC, a move that indicates heightened scrutiny.

ICE, the owner of the New York Stock Exchange, has been pushing into the mortgage market in recent years as a way to diversify its business away from share trading.