What early analysis of post-merger ICE tells us

The just-closed Intercontinental Exchange purchase of Black Knight will likely be "net-net" a good thing, not just for the mutual lender clients but also with companies like mortgage technology services provider Covius, that company said.

The products offered by Covius include compliance and document services and there are mutual clientele in varying degrees among the three companies, Covius Chief Business Officer Pete Pannes pointed out.

"There may eventually be some connectivity challenges as they work to integrate their concerns but marrying those two seems like a good thing for the marketplace," Pannes said.

But given that the deal just closed, it is still a wait-and-see situation when it comes to interoperability problems among not just ICE and Black Knight, but with those companies and other vendors like Covius, he said.

"We think we'll still be able to maintain the relationship we have with Black Knight around servicing solutions and data," Pannes said. "It may even open some channels for us with parts of ICE that we don't do business with."

But the inverse might also happen, in which it becomes difficult — as some deal critics warned — to work with a competitor; but Pannes does not see that coming down the line.

In fact, quite the opposite case exists, with Pannes noting the 2020 purchase of ComplianceEase by Covius competitor SitusAMC. Following the deal, ComplianceEase is no longer a standalone product, but Covius customers are able to use it on the same terms.

Pannes spoke in general terms about working with Constellation Software, the buyer of Empower and Optimal Blue, noting that Covius is agnostic regarding the interoperability with other technology providers. The completion of those sales is expected within 20 days.

"We still think that the marketplace is as robust as it was pre-announcement for us," he said.

Black Knight shareholders are benefitting more than expected as final compensation data for the acquisition puts the price paid at $11.9 billion.

A revision to the deal's original terms — that put a $13 billion valuation for the transaction — following an agreement to sell the Empower loan origination system dropped the compensation to an estimated $11.7 billion for Black Knight shareholders in cash and stock.

The final total, which was based on a calculation using ICE's 10-day closing average through Aug. 30, was $75.867 per Black Knight share in cash and 0.6577 shares of the buyer for those seeking stock compensation.

Based on preliminary figures, over 61.2 million shares of Black Knight elected to be exchanged for cash. Another 52.7 million will be compensated for in ICE stock.

However, holders of 27% of Black Knight shares outstanding, nearly 41.2 million, have yet to make a valid election regarding payment.

Furthermore, based on the preliminary results, too many Black Knight owners elected stock compensation. If that holds, the stock portion will be prorated into the right to receive approximately 68% of the merger consideration in cash and approximately 32% in the form of ICE common stock.

On Sept. 1, Black Knight's final day of trading, its stock closed at $75.76 per share, unchanged from the previous day. The 52-week high was reached on Aug. 29 at $75.99.

On Sept. 28, ICE will hold an investor call to discuss the deal.