CoreLogic Inc. was quietly celebrating its 10th year as an independent company since being spun off by title insurer First American Corp.
The Irvine-based data services and analytics company (NYSE: CLGX) had shed its lower margin units and after three years of falling sales, it was getting ready to show Wall Street that it could boost revenue.
“It’s hard to believe it’s been 10 years,” Chief Executive Frank Martell told the Business Journal in a June 25th interview. “From a market cap and growth prospect, it’s been a big success.”
The following day, CoreLogic found its independence threatened when it received an unexpected bid led by Bill Foley, chairman of Fidelity National Financial Inc., a $9 billion publicly traded title company that is the rival of what’s now known as First American Financial Corp. (NYSE: FAF) in Santa Ana.
Foley is also chairman of Cannae Holdings Inc. (NYSE: CNNE), which together with Senator Investment Group LP, own 15% of CoreLogic shares. They made a $7 billion takeover offer to buy each share for $65 in cash, which puts CoreLogic’s equity value at $5.2 billion and its debt around $1.8 billion.
“Despite its strong market position as a provider of data and analytics for the real estate and mortgage industries, we believe the company will not achieve its full potential under its current strategic plan,” Cannae Chief Executive Richard Massey and Senator Investment Partner Quentin Koffey said in a letter to CoreLogic’s board.
In the trading session after the news, shares of CoreLogic jumped 28% to $67.95, an indication that traders believe the activists will have to bid a higher price.
In a statement, CoreLogic, which now sports a $5.3 billion market cap, said it “will carefully review the proposal.” Martell declined to speak about the unsolicited bid. CoreLogic sees it as a hostile offer because the activists made no attempt to contact the company before the announcement was made, a person familiar with the situation told the Business Journal.
CoreLogic ranks No. 8 on the Business Journal’s annual list of publicly traded companies (see list, page 12).
The Original Spinoff
First American, one of the nation’s largest providers of title insurance, in 2010 spun off its data unit, CoreLogic, which some had considered undervalued. CoreLogic provides a variety of consumer, financial and property data to lenders, corporations and government agencies.
After the transaction, one of Orange County’s largest-ever spinoffs, both First American and CoreLogic had a market cap in the $2 billion range.
Martell joined as CFO in 2011 and the Business Journal honored him in 2013 with a CFO of the Year award.
CoreLogic’s first CEO was Anand Nallathambi, who died in 2017 after a brief illness.
“Anand’s death was quite a blow for me,” said Martell, who at that time was chief operating officer before being named CEO.
Martell’s career includes 15 years at General Electric Corp., where he learned from the legendary CEO Jack Welch.
“It was a great learning experience,” he said. “I met Jack Welch on many occasions. A lot of the things that he espoused, I’ve carried with me” such as being a strategic partner to customers and focusing on what the company is best at.
CoreLogic has gotten rid about half of its businesses it had at the time of the spinoff, divesting lower-margin and labor-intensive units like employment screening and maintenance of properties in default.
“When the company spun out, we were really focused on mortgage life cycle exclusively,” Martell said.
“Ten years ago, we were more services and now we are a data-centric company.”
It emphasized areas where it could automate and add analytical value in industries like insurance, as well as real estate. It’s acquired firms that provide software for underwriting and tracking property appraisals for lenders. It has added expertise in weather and earthquakes.
Nowadays, about 7 out of every 10 mortgages use one or more of its data sets, Martell said. CoreLogic, which has 4.5 billion property records and the tax payment history on 145 million parcels, sells its data to 2,000 lenders and 500 insurance companies, as well as state and federal governments. It has the leading market share of real estate listing software systems, provisioning more than 50% of all U.S. and Canadian real estate agents.
“We know basically everything” about a property, Martell said. “We’re able to tell an insurance carrier what the risk is.”
About 10% of its 5,200 employees work in Orange County, where he “absolutely” intends to maintain its headquarters, Martell said before the proposed takeover became public. He noted CoreLogic is currently renegotiating its lease for the 123,000-square-foot headquarters in the Irvine Spectrum, at the 40 Pacifica office tower next to the San Diego (405) Freeway.
Like other companies, it’s been affected by the coronavirus, sending about 90% of its employees to work from their homes.
Martell is proud of the company’s volunteer efforts in Orange County, including this year expanding from two to four days the time it pays employees to volunteer at projects. It’s sponsored Military Appreciation Day at the annual Hoag Golf tournament and recently gave $40,000 to Second Harvest Food Bank of Orange County.
CoreLogic’s shares tracked the S&P 500 for most of the decade, before beginning to lag a couple years ago. While CoreLogic’s adjusted profit margin has increased to 30% from 20%, its revenue has dropped for the past three years.
“We’ve spent many years reshaping the company’s revenue streams,” Martell said. “We’re choosy on where we want to grow.”
Analysts are skeptical about the promised revenue growth. They are forecasting revenue will fall again this year about 1.8% to $1.73 billion and that revenue will be flat in 2022.
The company in January began issuing a dividend, often a signal to Wall Street that the company is no longer a growth stock.
Martell said he finds himself spending about 25% of his time speaking with investors to emphasize the transition and that growth is coming.
“Our growth has been strong this year,” he said, pointing to a 6% year-over-year increase in the first quarter revenue to $444 million.
A couple of hours after his interview with the Business Journal, CoreLogic boosted its second-quarter revenue forecast to between $455 million and $465 million, up from a prior guidance of $420 million to $445 million.
A day later, the activist investors struck, questioning the timing of the boosted forecast as a “defensive move” because of its interest.
CoreLogic denied this, saying it was unaware of the pending offer.
As of press time, CoreLogic hadn’t announced whether it will accept the offer or if it will fight it in a proxy battle.
It will be a tough decision. Martell saw the value of his 638,000 shares in the company jump $11 million to $44.8 million on the day the bid was announced.
It’s not the first time CoreLogic’s position as a stand-alone public company has been called into question after its 2010 spinoff.
In 2011, the company formed an independent committee to explore strategic options, including a potential sale or merger, following pushback from a large institutional investor.
First American Financial, at the time owning about 8% of the company’s shares, at one point offered to buy back all or part of CoreLogic, but opted against moving forward.
CoreLogic in 2012 decided to stay the course as an independent company, following a recommendation by the independent committee.