Black Knight Financial Services, a mortgage processing technology provider backed by title insurer Fidelity National Financial and sponsor Thomas H. Lee Partners, expects to price a US$425m IPO on May 20. The deal was launched early Monday.
Black Knight plans to sell 17m new Class A shares at US$22–$25 each.
JP Morgan, Bank of America Merrill Lynch and Wells Fargo lead a 13-firm underwriting syndicate.
The deal follows the corporate restructure of Lender Processing Services (LPS), a business purchased by Fidelity National for US$2.9bn early last year.
Fidelity National then sold 35% of the renamed Black Knight business to Thomas H. Lee, one of whose specialties include investing in financial services businesses.
Black Knight’s corporate history is particularly complex since LPS was originally spun-off from a separate Fidelity spin-off – Fidelity National Information Services (FIS) – in July 2008 before it was brought back into the fold by the parent last year.
The IPO values Black Knight at more than US$3.7bn, versus 2014 revenues of US$855.8m and Ebitda of US$347.3m.
The company made a bottom-line loss of US$107.1m last year but made US$14.5m of net income in the first quarter of this year.
Black Knight is primarily using proceeds to repay debt, from the US$2.1bn of total debt at March 31.
Black Knight’s software is used by 23 of the 25 largest US mortgage originators to support their loan servicing operations and access data and analytics, including property ownership, lien and servicing data.
According to Black Knight, its proprietary technology platform services approximately 57% of all US first lien mortgages and this market share has grown by more than four percentage points over the last five years.
The company is benefiting from mortgage industry trends including increased regulation, the growing role of technology and increased demand for transparency and analytical insight.
Competitors include Fiserv, FIS, WiPro Gallagher Solutions and Ellie Mae in the technology segment and CoreLogic and First American Financial Corporation in the data and analytics segment.
One risk factor is the company’s concentrated exposure to a small number of large clients.
Wells Fargo accounted for 13% of revenue last year and JP Morgan 12%. This may have also contributed to these banks’ selection as lead bookrunners.
Black Knight plans to list on the NYSE under the symbol “BKFS”.
About 850,000 shares, or 5% of the offering, has been reserved for directors, officers and related persons of Black Knight and Fidelity National.
