Intercontinental Exchange Inc (ICE.N) (ICE) said on Thursday it would buy Ellie Mae, a technology platform for the mortgage finance industry, from private equity firm Thoma Bravo in a deal valued at $11 billion.
Strengthening its position in mortgage servicing has been a key focus for the owner of the New York Stock Exchange in recent years.
Why Ellie Mae?
Jeffrey Sprecher, chairman and chief executive of ICE, said in a statement the transaction represented a “one-of-a-kind opportunity” that would “enhance ICE’s growth strategy in mortgage technology”.
Buying Ellie Mae was expected to be accretive to ICE’s adjusted earnings per share in the first full year of ownership, the statement added.
Financing The Deal
The transaction is expected to yield a substantial profit for Chicago-based Thoma Bravo, which only completed the $3.7 billion take-private acquisition of Ellie Mae in April 2019.
ICE will fund its Ellie Mae purchase, which is expected to close before the end of 2020, predominantly using cash, with 16% of the value covered by the issuance of new ICE common stock.
ICE has been stepping up its presence in the mortgage market during the past several years, in a bet that the cumbersome, often paper-based process of closing a mortgage deal will go digital in the coming decades.
The M&A Scenario Amidst Covid
The COVID-19 pandemic has complicated merger and acquisition deal making, as social-distancing and restrictions on travel have made it harder for top executives to meet face-to-face, the head of Intercontinental Exchange Inc <ICE.N> said on Thursday.
“The COVID-19 environment has really created winners and losers in many spaces, including financial services,” ICE CEO Jeffrey Sprecher said. “We’ve had a lot of inquiries from fintech-type companies that are worried about their future funding capabilities.”
ICE, which bought the New York Stock Exchange in 2013, has grown from a small energy-trading business in 2000 to one of the world’s biggest exchange operators, with a $51.6 billion market cap, largely through acquisitions.
The most recent high-profile deal it explored was a more than $30 billion takeover of online marketplace eBay Inc <EBAY.O> that ICE abandoned in February following investor backlash.
Since then, the coronavirus pandemic has quickly spread, leading to lockdowns around the world, forcing work-from-home mandates and limiting in-person meetings.
Those measures have made it harder for chief executive officers to meet, get to know each other, and determine if their businesses would be a good fit, Sprecher said on a call with analysts.
“We’re in a great position if the right thing were to come along, but it’s a complicated environment for M&A just due to the social distancing that’s going on,” he said.