Business Context and Reporting Period
This Form 8-K, filed on June 19, 2013, by Fidelity National Financial, Inc. (FNF), reports a material change to the previously announced Agreement and Plan of Merger with Lender Processing Services, Inc. (LPS). Under the agreement, a subsidiary of FNF will merge with LPS, with LPS surviving as a subsidiary of FNF.
Key Financial Metrics and Transaction Terms
The filing details a significant alteration to the consideration mix for the merger:
- Cash Consideration Increase: FNF exercised an option to increase the cash payment per share of LPS common stock from $16.625 to $22.303.
- Stock Consideration Decrease: The increase in cash consideration corresponds to a decrease in the number of FNF Class A common shares issued to LPS shareholders.
- Financing Commitment: Funds affiliated with Thomas H. Lee Partners, L.P. (THL) increased their equity financing commitment by $200 million to support the higher cash consideration.
- Funding Sources: The remaining increase in cash consideration is expected to be funded through FNF's cash on hand and existing credit facilities.
Material Changes Versus Prior Period
The primary material change is the adjustment of the merger consideration structure announced on June 19, 2013, compared to the initial terms disclosed on May 28, 2013. The filing does not provide comparative financial performance metrics (revenue, profit, cash flow) for FNF or LPS, as this is a transactional update rather than a periodic financial report.
Guidance, Outlook, and Risks
Exchange Ratio Adjustments: The stock exchange ratio remains subject to adjustment based on the average trading price of FNF common stock prior to closing. Specific thresholds include:
- If the average FNF stock price is greater than $26.763, the ratio adjusts via a specific formula.
- If between $24.215 and $26.763, the ratio is fixed at 0.42948.
- If between $20.000 and $24.215, the ratio adjusts to fix the stock consideration value at $10.400 per share.
- If less than $20.000, the ratio is fixed at 0.52000.
Future Options: FNF retains the right to further increase the cash consideration (up to a total increase of $16.625 per share) prior to mailing the joint proxy statement/prospectus, which would further reduce the stock consideration.
Risks and Contingencies: The transaction is subject to regulatory approvals, stockholder votes, and the satisfaction of other closing conditions. Forward-looking statements in the filing highlight risks regarding integration, realization of synergies, regulatory compliance, and dependence on real estate market conditions.
Important Facts for Investor Verification
- Verify the final terms of the merger in the upcoming Registration Statement on Form S-4 and Joint Proxy Statement/Prospectus.
- Monitor FNF's stock price to determine the final exchange ratio applicable at closing.
- Confirm the status of regulatory approvals and stockholder votes required to consummate the merger.
- Review the amended equity commitment letter with Thomas H. Lee Partners regarding the $200 million increase.