Derailed merger leads to executive shakeup at Stewart

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Stewart Information Services shook up its executive ranks following the termination of its merger agreement with Fidelity National Financial.

The companies called off the transaction before the stock market opened on Sept. 10, a few days after the Federal Trade Commission announced its opposition to the deal.

Frederick Eppinger, a Stewart director and former president and CEO of The Hanover Insurance Group, is taking over as CEO, replacing Matthew Morris.

Morris will become Stewart's president. John Killea, who had been president since 2017, will retain his other titles as general counsel and chief legal officer.

"While we were disappointed with the FTC's decision regarding Stewart's combination with Fidelity, we are well-positioned to execute on a stand-alone strategic plan built around growth and profitability," Thomas Apel, Stewart's chairman, said in a press release.

"The actions we have taken today are designed to enhance our strength, focus our company on the opportunities before us and build a leadership team with the best mix of experience and expertise to drive value creation. To further support the new direction, we will be actively reviewing the board's makeup to ensure the appropriate mix of diversity as well as operational and growth-oriented experience," Apel said.

Fidelity will pay a $50 million reverse termination fee to Stewart. The deal was originally valued at $1.2 billion.

The FTC action was the final blow as the transaction was already on life support following the New York Department of Financial Services decision to reject the deal on competitive grounds.

The end of the deal is likely to put a hold on consolidation in the title industry for the time being.

In a note published after the FTC announcement, but before the deal was terminated, Keefe, Bruyette & Woods analyst Bose George wrote "if the deal breaks, we believe that a comparable bid for Stewart is unlikely. We think First American is an unlikely buyer since the FTC concerns would generally apply to First American as well since they are also such a large player in the title industry.

"To the extent there are bidders from outside the industry, we think the bids are likely to be materially lower, since an external bidder would not have the ability to realize any synergies from increased scale. Given that, if the deal breaks, we think the most likely outcome is for Stewart to continue as an independent company," George said.

Fidelity had a 32.6% nationwide market share at the end of the first quarter, followed by First American at 26.1%, according to the American Land Title Association. Old Republic had a 15.9% share while Stewart's share was 10.5%.

The next largest company is Westcor Land Title, at a 3.4% share. Westcor is part of a group of 28 independent or regional companies listed by ALTA with a total market share of just under 15%; four of those have 9% of the business.

In New York, the competition between the Big 4 is much closer. At the end of the first quarter, First American had a 24.8% share in the state, followed by 23.1% for Fidelity, 20.9% for Old Republic and 20.8% for Stewart.

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M&A Underwriting State regulators Career moves Fidelity National Financial FTC Keefe, Bruyette & Woods First American Financial Corp. New York