Constellation Software announced it will acquire Black Knight, Inc.’s Optimal Blue business for $700 million in an all cash deal designed to help win regulatory approval for Intercontinental Exchange’s previously-announced acquisition of Black Knight. The divestiture of Optimal Blue is meant to appease the Federal Trade Commission, which had filed suit against Intercontinental Exchange to block its $13 billion acquisition of Black Knight.
When Intercontinental Exchange proposed it would acquire rival Black Knight, the FTC swiftly moved to halt the merger, announcing, “This deal would reduce competition in key areas of the mortgage process, ultimately raising costs for lenders and homebuyers. The FTC will intervene when illegal mergers risk harming competition in such critical markets.”
Intercontinental Exchange is the largest provider of home mortgage loan origination systems in the U.S. while Black Knight owns the second largest system. These systems are used to manage the documents and tasks required to generate mortgages. The FTC argues that bringing both systems under one company would enable Intercontinental Exchange to charge the lenders using their systems more – and those costs, in turn, would be passed along to homebuyers.
Intercontinental Exchange and Black Knight proceeded anyway, filing a merger agreement with the SEC in May. The companies’ latest move to divest Black Knight’s Optimal Blue to Constellation Software is viewed by analysts as “a feasible path to guarantee the merger deal [is approved].”
Under the Biden Administration, the FTC has repeatedly promised muscular antitrust policies and made high profile moves against large technology companies, including Amazon. FTC Chair Lina Khan, has come under fire for her policies, with the chair of the House Judiciary Committee deriding her for “trying to usher in a radical departure from the norms that made the American economy great, to a system where her and her cronies have unchecked power over business practices in our country.” This is on the heels of the FTC’s legal setback the just the week prior when a federal judge ruled that the Commission could not block Microsoft from acquiring Activision Blizzard, a merger that would create the third-largest company in the gaming industry by revenue.
The FTC has faced multiple additional setbacks in its pursuits. Its suit against Meta for monopolizing the social-media market was dismissed in 2021 for lack of evidence, and the FTC lost its suit to block Meta’s acquisition of virtual reality startup Within Unlimited in 2022. Whether the FTC will get more traction in its case against Intercontinental Exchange remains to be seen in the coming weeks.
According to Matterhorn’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions, Black Knight is advised by law firms Wachtell, Lipton, Rosen & Katz and Shearman & Sterling LLP. Constellation Software is advised by Womble Bond Dickinson (US) LLP.