Shares of Santa Ana-based title insurer First American Corp. closed up 18% on Friday on word that two of its rivals are combining.
Fidelity National Financial Inc., a Florida-based title insurer and key rival of First American, said Friday it is paying $126 million for Virginia’s LandAmerica Financial Group Inc.
Fidelity is the No. 2 title insurer after First American. LandAmerica is No. 3. The companies write policies protecting the buyers of homes and other real estate from claims contesting their ownership.
A combined Fidelity and LandAmerica would become the largest title insurer with 46% of the market, according to Keefe, Bruyette & Woods Inc. analyst Nat Otis.
While the deal would dislodge First American, the company could pick up any business lost by the combined companies, Otis told Dow Jones.
That drove up First American’s shares, which have a market value of about $2 billion.
Fidelity is buying LandAmerica as title insurers are struggling with the housing downturn and a slow commercial real estate market.
Its offer is worth 75% more than what LandAmerica’s shares were trading at before the offer.
But Fidelity still is getting something of a deal: LandAmerica’s shares are off 90% in the past year.
