The Federal Trade Commission (FTC) has agreed to withdraw its challenge to the acquisition of Black Knight by Intercontinental Exchange (ICE), erasing a key regulatory barrier and essentially paving the way for the two mortgage industry giants to merge into one unit.
An order to withdraw the matter from adjudication was issued on July 25, nearly five months after the FTC first took action to block the companies’ union. According to a joint statement from ICE and Black Knight, the FTC will dismiss the preliminary injunction in U.S. District Court that sought to block the closing of the merger, and it will dissolve the temporary restraining order that was in place.
The tech powerhouses are two of the largest providers of digital loan origination tools and data for the mortgage industry. ICE and Black Knight first publicized their potential merger in May 2022, when it was announced that the former entered into a definitive agreement to acquire the latter in a cash-and-stock deal with a market value of $13.1 billion.
The FTC, which chose to intervene against the merger in a unanimous 4-0 vote, said in its original statement regarding its challenge that the transaction could “drive up costs, reduce innovation and reduce lenders’ choices for tools necessary to generate and service mortgages.”
But apparently the commission has changed its thinking after ICE and Black Knight agreed to divest two key parts of Black Knight’s business: Empower, a widely used loan origination software suite, and Optimal Blue, a division that provides data and software services to various real estate-related companies. Both entities were conditionally sold to Toronto-based Constellation Software Inc. Optimal Blue was sold for a total price tag of $700 million, while the price for Empower was not publicized.
Even after the dissolution of the FTC’s challenge, not all within the lending world are satisfied that ICE’s acquisition of Black Knight will do no harm. Scott Olson, executive director of the Community Home Lenders of America, announced on Friday that the group had sent a letter to the FTC to oppose the purchase, even after the divestitures of the two Black Knight divisions.
“Despite stories speculating about an imminent approval of ICE’s purchase of Black Knight, CHLA continues to have serious concerns about their anti-competitive, anti-consumer practices, which we believe would be greenlighted by an approval without monitoring and regulatory actions to curtail these practices,” Olson said.
For one thing, the CHLA asserts that ICE “continues to engage in anti-competitive actions that hurt lenders and consumers” — practices that the CHLA argues would be sanctioned if the FTC approves the purchase. Such practices, according to Olson, include one-way pricing mechanisms for user seats of software and data products; “junk fees” disguised as vendor-access click fees; and “unfair treatment” of and “bad faith negotiations” with lender clients.
Barring a significant 11th-hour development, however, it looks like the transaction is cleared for formal closure. With the challenge dissolved, ICE and Black Knight have now consented to refrain from closing their merger until 10 days after they agree with the FTC on mutually acceptable conditions for the transaction. If such terms are not reached by Aug. 25 and the agreement is not extended, any party may unilaterally terminate the arrangement.
