) 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
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.
Information Services Group, Inc
) carrying a Zacks Rank #1(Strong Buy) appear attractive.
Huron Consulting Group Inc
) carrying a Zacks Rank #2 (Buy) is also worth noting.
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