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In a 3-0 vote Thursday, the Federal Trade Commission signed off on an agreement it said will preserve competition after Intercontinental Exchange Inc.’s proposed $11.7 billion acquisition of rival real estate and mortgage technology provider Black Knight Inc.
To address concerns raised by antitrust regulators, Intercontinental Exchange (ICE) and Black Knight said they were prepared to sell Black Knight’s Empower loan origination system and Optimal Blue business to subsidiaries of Canadian-based software giant Constellation Software.
The divestitures of Empower and Optimal Blue — along with other concessions included in a consent order hammered out in August by the FTC, ICE and Black Knight — resolve the FTC’s antitrust concerns, the commission said.
“This deal as originally structured would have reduced competition in key areas of the mortgage origination process, raising costs for lenders and homebuyers,” the FTC Bureau of Competition’s Director Henry Liu said in a statement. “To address these concerns, the Commission’s order provides structural relief and a variety of tools to preserve competition in these critical markets.”
The consent order — which was approved for public comment rather than on a final basis — would require ICE and Black Knight to seek prior FTC approval before acquiring an interest in another loan origination system, or reacquiring any of the assets the companies are divesting, for the next 10 years.
The companies would also be required to give the FTC a heads-up before acquiring an interest in a product, pricing and eligibility engine (PPE) business like Optimal Blue.
The FTC moved to block the deal in March, saying that eliminating Black Knight as a competitor “would free ICE to more aggressively raise prices that it charges mortgage lenders for origination services.”
ICE and Black Knight had originally hoped that selling off Black Knight’s Empower loan origination system alone would be enough to resolve antitrust concerns, but the FTC said that solution didn’t go far enough.
Constellation, the FTC noted, would serve as a reseller of ancillary services to be provided by ICE, including Black Knight’s Optimal Blue mortgage product and pricing engine (PPE).
“Black Knight’s Optimal Blue is the clear industry leader, serving lenders that originate as much as 40 percent of the nation’s residential mortgages each year,” FTC attorneys said in their March complaint.
The consent order the FTC approved Thursday would give Constellation a license to resell, with Empower, “certain other Black Knight mortgage-related products and services that would be acquired by ICE.”
For one year, ICE and Black Knight would also be required to facilitate Constellation’s hiring “of certain employees not already included in the divestitures who have responsibilities for the divested products and businesses.”
The companies would also be prohibited “from enforcing any noncompete or non-solicit provision or agreement against any employee who seeks or obtains a position in the divested businesses.”
ICE and Black Knight announced Friday that they expect the merger to close on Sept. 5 and they could complete the divestitures of the Empower and Optimal Blue businesses to subsidiaries of Constellation Software Inc. within 20 days of the deal closing.
Originally valued at $13.1 billion when proposed last year, an amended merger agreement valued Black Knight at $75 per share or $11.7 billion.
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