What do you do when your $6B company (Fidelity) has an extra $1.5B in cash languishing in your bank accounts? You buy back a company (LPS) that you spun out and you start all over again. If you ever doubted the value of providing software and data services to the financial industry, Mr. Foley just answered it. He is now officially back in the MLS business…. Almost. Deal is not quite done.
But wait, there is more. Foley is a self made Billionaire who may perhaps be best known for his personal investing in the wine industry – having purchased more than $200 million in vineyards over the past decade and a half. Here in California, they say that the best way to make a little money in the wine industry is to start out with a lot of money. Regardless, Bill Foley is a legendary and upstanding member of the California and New Zealand wine movements. It just goes to show that you need to drink a lot of wine to appreciate how to offer data and software services to the financial industry that underpins real estate today.
There were many hedge funds who suspected that Foley might buy Zillow or Trulia. There was some toe dipping into consumer facing websites with Cyberhomes. Perhaps losing tens of millions on Cyberhomes was enough to teach him that those companies are not attractive to him. Indeed, Zillow, Trulia, and MOVE have all learned that they need to diversify into other services to make money providing software services (becoming more like LPS). The consumer sites, even at scale, do not yield healthy profitability and sustained growth to investors unless they buy them on the way up (which Foley may have done).
There was nary a whisper of Fidelity buying CoreLogic. Historically, Fidelity’s chief competitor First American would have poisoned such a trade. But they are out of the picture now and CoreLogic has a comparable valuation to LPS. In many ways, LPS was to Fidelity exactly what CoreLogic was to First American. These companies have been on parallel course for years and years and are vicious competitors. It would be a hoot to see First American buy back CoreLogic or even put in a bid for LPS. There is a “go shop” period of 90 days in the offer that allows LPS to find a better price. Place your bets boys!
Don’t expect there to be any impact to this acquisition. There are three product groups within LPS that have interested customers in the residential real estate industry: MLS, Tax, and RPR. None of them are likely be impacted unless they are strengthened by the sale. These business units will have access to even more capital than before. In other words, if you are an LPS customer today – there will be no changes in life as you know it unless they improve. They can inject a lot of data and analytical tools into their products if they want. The assets are sitting there waiting to be integrated.
Fidelity and LPS have always operated their MLS and tax business very well with little meddling. Although they are the second largest provider in America to CoreLogic, the MLS and Tax services provided to residential real estate are pretty small business units in the larger scheme of things.
Where I think that things could get interesting in on the RPR or Realtors Property Resource front. RPR has been on a steadfast ramp to improve data licensing to the financial industry and they are now partnered with one of the top performing firms with enormous influence. Not that LPS was not a powerhouse at $2.9B; but they are significantly bigger now.