For Intercontinental Exchange (NYSE:ICE), trying to set up a deal to acquire Black Knight (NYSE:BKI) is proving a bigger challenge than it likely saw coming. However, the latest move the duo made might help pave the way for a smoother transaction, and it might be thanks to Constellation Software (OTHEROTC:CNSWF).
Intercontinental Exchange and Black Knight worked out a deal to sell the Optimal Blue business Black Knight held to Constellation Software. The deal was valued at $700 million, and it’s hoped that, without Optimal Blue in its arsenal, Black Knight will be able to get around the regulatory surge that’s been preventing so much merger and acquisition of late. Investors had an unexpected reaction to the move; Black Knight stock shot up over 14% at one point in Monday afternoon’s trading, but Intercontinental Exchange slipped fractionally as word of the deal emerged.
Intercontinental Exchange and Black Knight have been working frantically to shut down any concern from regulators around the proposed deal, and the move to sell Optimal Blue was just the latest. Back in March, Black Knight also sold off its loan origination systems to one of Constellation’s subsidiary groups. That included several operations under the origination system’s banner, including AIVA, Exchange, and LendingSpace systems. The move would ultimately make ICE the “…largest mortgage services company in America,” noted a HousingWire report, so it’s easy to see why regulators are hesitant.
The components of this venture, meanwhile, have very different outlooks. Intercontinental Exchange is currently a Moderate Buy, with a 9.27% upside potential thanks to its average price target of $128.33 per share. Meanwhile, Black Knight is currently a Hold, and comes with a 10.8% downside risk thanks to its average price target of $62.50.
