CoreLogic Inc. is doing its part to prevent an activist shareholder from completing a corporate takeover—or at least significantly boost the price that the shareholder group, led by one-time Orange County executive Bill Foley, will have to pay to buy Orange County’s eighth-largest public company by market value.
The Irvine-based provider of real estate data (NYSE: CLGX) recently reported second-quarter results that topped analysts’ consensus estimates. It also provided upward guidance not only for this year, but 2021 and 2022 as well.
In addition, CoreLogic boosted its quarterly cash dividend—which it began just this year—by 50% to 33 cents a share, and said it would buy back $1 billion in shares by the end of 2022.
It even convinced analysts that its stock is worth up to $82, which is a 22% increase over where its shares now trade.
“Accelerating growth trends, competitive wins, share gains and incremental operating leverage are driving strong cash flows, substantial capital returns and enhanced profitability—and high confidence in achieving our targets in 2021 and beyond,” CoreLogic said in a Aug. 4 letter to shareholders.
“Our results are being recognized by the markets, as research analysts have significantly increased price targets and commented on how CoreLogic is poised for a re-rating of its stock.”
Those are some of the defensive moves the one-time unit of Santa Ana title insurer First American Financial Corp. (NYSE: FAF) have made to fend off Foley, a longtime exec at First American’s primary competitor, Fidelity National Financial.
CoreLogic’s also been playing offense.
The company last week issued a “fact sheet” to shareholders, saying that the Federal Trade Commission has launched an investigation into the proposed takeover, casting doubt over whether the deal could ever get completed.
The firm has also insinuated that the activists might not have the funds to complete a deal as promised, and suggest the bid is being done in part to gain access to confidential corporate information.
Plan Working?
Whether CoreLogic’s plan works remains to be seen.
Some six weeks after the activist shareholders’ initial offer, the activist group has yet to take the bait and increase its bid beyond its initial $65 a share offer. And, they point out, no other competing offer has appeared for the company, which now counts a market cap of about $5.4 billion.
Instead, the activists have proposed a proxy vote to see if other shareholders like their offer.
“We have received widespread support from our fellow CoreLogic shareholders,” the activists said in a letter to shareholders. “Unfortunately, CoreLogic and its advisers have instead chosen to employ a series of defensive maneuvers aimed at eliminating this opportunity.”
$68 or More
Foley has proposed an entirely new slate of directors for the board of CoreLogic, whose current chairman is Paul Folino, the former head of local tech firm Emulex who is involved in numerous local philanthropic groups (see story, this page). The activists have also set up their own website to persuade other shareholders to back them: www.UnlockingCoreLogic.com.
Wall Street investors are still betting the offer will be raised to around $68, where its shares have hovered in the past six weeks since the initial bid.
CoreLogic could reach as high as $80 a share, SunTrust analyst Andrew Jeffrey wrote in a July 23 note to investors.
“We argue CLGX is undervalued, owing to strong free cash flow and improving non-mortgage fundamentals,” he said. “We assert CLGX will see multiple expansions—proposed takeover notwithstanding—as the company blends down mortgage exposure, takes share and divests lower-margin businesses.”
Other analysts have also boosted their price targets from $68.50 to as much as $82 a share.
The OC Foley Connection
It’s been 10 years since CoreLogic was spun out of First American. Since Frank Martell took over as chief executive in 2017, he’s been divesting lower margin and labor-intensive units to concentrate on data centric areas that could be automated.
That shift also caused revenue to fall annually for the past three years. From the beginning of 2017 to the end of 2019, CoreLogic shares rose 19% compared with a 46% rise of the S&P 500 Index.
On June 26, its shares jumped 28% after Cannae Holdings Inc. and Senator Investment Group LP, which hold a combined 15% of the shares, made a $7 billion takeover offer, which includes debt of around $1.8 billion.
Foley, chairman of Cannae, was well known in Orange County business circles in the 1990s when he ran Fidelity National (NYSE: FNF), which nowadays sports a $10 billion market cap. The latter was based in Irvine in the 1990s before eventually moving to Florida.
Unexpected Bid
The initial offer caught CoreLogic by surprise, which had to scramble to hire legal and financial advisers to analyze the deal. A few weeks later, its board unanimously rejected Foley’s offer, saying it undervalued the company.
This battle pits Foley against Folino, a well-known area executive with deep Orange County ties.
“Our Board is unanimous and highly confident in its belief that CoreLogic will be able to deliver significantly more value to shareholders than this opportunistic proposal,” Folino said in a July 29 statement.
In last week’s letter, CoreLogic also noted that “regulators and market competitors see significant issues” with the bid by Foley, whose Fidelity is the largest title insurer in the country.
CoreLogic has come to dominate certain parts of the real estate data and analytics industry. 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. About 7 out of every 10 mortgages use one or more of its data sets, Martell told the Business Journal in a June interview just before the proposed offer was made public.
A date for the proxy election hasn’t yet been set.
