In a landmark deal that is expected to have wide ramifications for the mortgage finance industry, Intercontinental Exchange Inc has announced that it would buy Ellie Mae from private equity firm Thoma Bravo. The deal is valued at $11 billion.
With this acquisition ICE, the owner of the New York Stock Exchange is expected further to strengthen its position in the mortgage servicing industry. This has been one of the key goals of ICE over the past several years and it has been slowly reinforcing its presence in the mortgage sector. By getting Ellie Mae in its fold, ICE will transition from a paper-based mortgage processing system to a digitalized environment in keeping with the modern times.
A giant step has now been taken in this direction. Ellie Mae, as a software company, processes more than 35 % of mortgage applications in the USA. It operates on a SaaS (Software as a Service) model. The company is focused on streamlining and automating the originating and funding process of new mortgage loans and helping meet regulatory compliance norms.
Chairman And Chief Executive of ICE put the deal in its proper perspective when he says that the transaction is a landmark achievement that would greatly enhance the growth strategy of ICE in mortgage technology.
Chicago-based private equity firm Thoma Bravo will make a substantial profit by spinning off Ellie Mae. It was only in April 2019 that Thoma bought the mortgage firm for $3.7 billion and is now closing the transaction for a huge gain. Bravo has valued Ellie Mae for $11 billion, including debt.
In the last 20 years, Bravo has acquired more than 200 technology and software companies at values estimated to be about $50 billion with over $30 billion being the current investment commitments
Atlanta-based ICE, generally known as ICE+1.35% will cover 16% of the $11 billion by issuing new ICE common stock. The rest that is 84% will be mainly in cash. It works out to about $9.25 billion in newly issued debt and $1.75 billion in stock. This is subject to getting the necessary regulatory approvals though it is expected that matters will be finalized in the third or fourth quarter of 2020.
A statement from ICE explains that buying Ellie Mae would be a value addition for the company in terms of adjusted earnings per share in the first completed year of ownership.