Santa Ana-based First American Corp.’s $100 million acquisition last week of a Sacramento company that helps mortgage lenders and investors vet loans is the company’s largest yet, Chief Executive Parker Kennedy said.
First American paid $100 million in cash plus an unspecified amount of stock for CoreLogic Systems Inc., which provides software to mortgage lenders, investors and insurers.
First American folded CoreLogic into its First American Real Estate Solutions subsidiary, of which Europe’s Experian Group Ltd. owns 20%.
How long First American Real Estate Solutions stays part of First American remains to be seen. Analysts suggest the division could be spun off in an initial public offering.
First American’s shares jumped nearly 5% on word of the acquisition. The company counted a market value of $4 billion last week.
The company’s shares now are just below their high set in early 2006 before slumping with the slowing housing market. The bulk of First American’s $8 billion in yearly sales comes from title insurance.
The company has gone to lengths in the past decade to diversify. It’s been making acquisitions on a monthly basis, many through publicly traded subsidiary First Advantage Corp. of St. Petersburg, Fla.
“Now, we are fundamentally a data provider,” Kennedy said.
CoreLogic employs more than 200 people. Most will remain in Sacramento. The privately held company, formed in 1997, did about $74 million in sales last year.
First American Real Estate Solutions is a spinoff candidate, according to Nik Fisken, an analyst with Stephens Inc.
“Given the new company’s structure and (First American’s) apparent focus on value realization, we suspect a liquidity event, such as an IPO or a tax-free spinoff, will occur with the new company in the medium term,” Fisken said in a research report last week.
The unit could see a market value of $1 billion or more, according to Fisken.
First American Real Estate Solutions has been one of the faster growing parts of the company, thanks to the buying spree of the past few years.
Since 2004, First American has folded in analytics companies LoanPerformance, UK Valuation and Basis100, as well as buying minority stakes in The Bohan Group Inc., ComplianceEase, BasePoint Analytics and Australia’s RP Data.
There’s little worry about buyer’s remorse with CoreLogic, Kennedy said.
“We already knew (CoreLogic) very well, and were very familiar with their products,” he said. “We knew what we were buying.”
George Livermore, president of First American’s property information and services business, is set to serve as president of the expanded First American Real Estate Solutions.
Steve Schroeder, formerly chief executive of CoreLogic, will oversee the mortgage risk analytics business for the company, reporting to Livermore.
