Black Knight buying Optimal Blue with help from Cannae and THL

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Black Knight is partnering with investor Thomas H. Lee Partners and Cannae Holdings — the hostile bidder for CoreLogic — to purchase product and pricing engine provider Optimal Blue from GTCR.

As part of the transaction, the buyers will place Optimal Blue into a new entity with Compass Analytics, which Black Knight acquired last September.

Black Knight will own 60% of the new venture. Cannae and THL will own 20% each. Black Knight plans to pay $1.8 billion of cash in the deal, which is expected to close in the third quarter.

Both Black Knight and Cannae were spun out of Fidelity National Financial, and all three companies remain tied to Bill Foley. Cannae, along with Senator Investments, is attempting a hostile takeover of CoreLogic, which has its own property information businesses. This transaction is not expected to impact that pursuit.

Thomas H. Lee Partners was a significant investor in Black Knight, but sold what remained of its stake in May 2018.

GTCR teamed up with Scott Happ, the former Mortgagebot CEO, to purchase Optimal Blue in July 2016. Happ will remain as Optimal Blue's CEO.

Black Knight and Optimal Blue "share similar business models, which include subscription-based recurring revenues and significant operating leverage," Black Knight CEO Anthony Jabbour said in a press release.

"We believe Optimal Blue will be accretive to our key financial metrics and will create significant value for our shareholders. Combining the strengths of Black Knight and Optimal Blue will give clients of both companies additional offerings from a single provider and will significantly expand Black Knight's opportunities to cross-sell our comprehensive solutions," he said.

Black Knight did not comment beyond the press release, citing a quiet period before its earnings release on Aug. 10.

"In addition to Optimal Blue's high-quality and passionate management team, we are pleased and honored to be partnering with two experienced and successful investors in Cannae and THL, both of which we have known and respected for a long time and are confident will provide meaningful value-add," Jabbour said.

Black Knight and Cannae are also investors in Dun & Bradstreet, which recently conducted an initial public offering.

The acquisition is being funded with cash on hand, debt, and equity contributions of $290 million each from Cannae and THL, a press release from Cannae said. In addition, Cannae will provide $100 million in debt financing for the Optimal Blue/Compass Analytics combination.

"Optimal Blue has transformed into a true digital marketplace with significantly enhanced capabilities and broader reach and relevance to market participants," GTCR Managing Director Collin Roche said in that company's press release. "It has grown its client base, expanded its integrations with the mortgage technology ecosystem, and solidified its unique position at the nexus of commerce and transaction flows within the secondary mortgage market. We believe the company is well-positioned to continue its growth as part of Black Knight."

Among Optimal Blue's purchases under GTCR's ownership were Comergence Compliance Monitoring in May 2017 and whole loan trading technology company Resitrader in July 2018.

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M&A Digital mortgages Mortgage technology Underwriting Secondary market Black Knight Technology