CoreLogic Inc. (CLGX) agreed to acquire Marshall & Swift/Boeckh, DataQuick Information Systems and the credit and flood services operations of DataQuick Lender Solutions from Decision Insight Information Group. The total value of the combined deal is worth $661 million. The agreement is in line with the company’s strategy to expand its Data and Analytics (D&A) segment.
Briefing the Units
Marshall & Swift/Boeckh (MSB) provides residential and commercial property valuation solutions to the property and casualty insurance industry. The unit was established in 1930.
DataQuick Information Systems’ (DataQuick) database has more than 120 million U.S. residential properties. This huge database helps the unit provide advanced property data and analytics information to mortgage originators and servicers, investors, real estate professionals and the public sector.
Financials & Transaction Details
The company will finance the deal from its cash on hand and by refinancing its existing secured debt. CoreLogic had cash and cash equivalents of $125.6 million on Mar 31, 2013.
The consideration includes cash tax benefits of about $115 million and the purchase of MSB's 29.5% ownership interest in Symbility Solutions for $23 million.
Due to the refinancing of debt, the company’s current debt maturity will be extended by about 3 years, with net debt at about 2.5x adjusted EBITDA.
Rationale Behind the Acquisition
CoreLogic intends to grow its D&A segment to more than 50% of consolidated revenues by 2016. The acquisition is therefore a strategic fit and would strengthen its foothold in property and casualty insurance, besides enriching the existing property data and analytics business.
The acquisition is estimated to be 4.5% accretive to operating net earnings per share (EPS) and 16% to cash EPS in 2013, excluding one-time reductions in acquired deferred revenues and other purchase accounting adjustments.
Apart from synergies, the integration of these units will open new growth avenues for CoreLogic. Customers will also benefit from new and enhanced products and service offerings. According to CoreLogic, the addition of MSB will increase its insurance-related revenues by almost $100 million annually. The acquisition will also broaden CoreLogic’s client base.
Additionally, based on a subscription–based business model, DataQuick and MSB are higher margin businesses with high retention and solid cash flow. Thus, the acquisition will augment CoreLogic’s financial flexibility going forward.
The credit and flood services operations of DataQuick will add scale to the Mortgage Origination Services business.
The transaction is expected to culminate in the third quarter of 2013, pending closing conditions.
Incremental Share Buybacks
The board of directors of CoreLogic increased the 2013 share repurchase authorization to at least 8 million shares (8% of outstanding shares) from 5 million shares targeted previously. In 2013, CoreLogic bought back 2.9 million shares, deploying $500 million over the last 36 months.
The increased repurchase target reflects the company’s commitment to return value to its shareholders. It also testifies CoreLogic’s sturdy financial position backed by a focus on driving revenue growth, margin expansion and high rates of free cash flow.
Positive Reaction from Market
Based on these favorable developments, investors gained confidence in the company. As a result, the stock price surged nearly 8.1% to close at $25.05 on Monday.
CoreLogic presently carries a Zacks Rank #3 (Hold). Over the last 60 days, the earnings estimates for the stock had hit a plateau. With optimism over the current acquisition and efforts to unlock shareholder value, we expect upward revisions to the estimates. This will consequently improve the Zacks Rank.
Other Stocks to Consider
While we currently remain on the sidelines for CoreLogic, Hill International, Inc. (HIL) and Information Services Group, Inc. (III) carrying a Zacks Rank #1(Strong Buy) appear attractive. Huron Consulting Group Inc. (HURN) carrying a Zacks Rank #2 (Buy) is also worth noting.
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