Beyond the Federal Trade Commission postponing legal action, there is another good reason to believe Intercontinental Exchange Inc.’s $11.7 billion buyout of Black Knight Inc. will gain antitrust approval.
Wall Street, which has a good sense of these things, signaled it anticipates the deal receiving approval by pushing up Black Knight’s trading price.
Black Knight’s stock jumped as much as $10.23 to a 52-week high of $71.49 on July 17 after announcing a deal to sell its Optimal Blue data subsidiary to Constellation Software Inc., to satisfy the FTC’s antitrust concerns.
“We think today’s announced intent to sell its Optimal Blue business to Constellation Software significantly increases the probability that Intercontinental Exchange closes its proposed acquisition of Black Knight at $75/share,” Truist Securities analyst Andrew Jeffrey said in a research note on July 17.
ICE agreed in May 2022 to pay $85 a share to buy Black Knight.
However, because of antitrust issues, the companies announced an agreement in March to sell Black Knight’s mortgage origination software subsidiary called Empower. They also amended the buyout deal and agreed to the $75 a share value.
But the FTC wasn’t satisfied with that divestiture plan and filed an administrative complaint and sought an injunction in federal court to block the merger.
The FTC was concerned the merged company would control too much of the U.S. mortgage technology market. Jacksonville-based Black Knight dominates the market for processing mortgage loans and Atlanta-based ICE, best known as the operator of the New York Stock Exchange, also has a large mortgage technology division.
After the Optimal Blue deal was announced, the FTC postponed legal action to stop the deal, saying in court filings the sale agreement is a “significant development” in the case.
The FTC’s administrative complaint in March said in addition to loan processing and origination technology offered by the two companies, the merger would harm competition for product, pricing and eligibility engines, or PPEs, which are add-ons to loan origination software that lenders use to find the best interest rates for homebuyers.
Optimal Blue is described by Black Knight as a PPE business.
Black Knight acquired majority control of Optimal Blue in 2020 as part of a partnership and bought out the other partners in 2022.
The company said Optimal Blue had an enterprise value of $1.8 billion when it announced the partnership deal in July 2020. It agreed to sell the business to Constellation for $700 million.
CSX Corp. reported second-quarter earnings that basically met expectations, but its stock dropped after the report because investors were apparently hoping for more.
“We expect CSX will underperform and lead the U.S. rails lower despite headline EPS that was in-line with consensus,” J.P. Morgan analyst Brian Ossenbeck said in a research note before the market opened July 21, after the earnings report late the previous day.
Earnings of 49 cents a share were down 5 cents from the second quarter, which included a 4-cent gain on a property sale. That matched the consensus forecast of analysts of 49 cents.
“Our conversations indicated the buy-side expected a beat with CSX being a popular long, and for good reason: CSX has outperformed peers operationally and is also closer to converting truckload freight based on strategic investments and reliable service,” he said.
Ossenbeck maintained a “neutral” rating on the stock.
“While we still believe CSX is on the right long-term strategic path, estimates need to move lower and expectations also need to be reset,” he said.
Barclays analyst Brandon Oglenski maintained an “overweight” rating but expressed caution about profit margins in his note.
“The company will along with most other U.S. carriers face incremental labor cost increases in the third quarter following last year’s agreements. Further, incrementally lower fuel surcharge recoveries and lower intermodal storage fees from a year ago will challenge revenue in an otherwise tepid period for demand,” he said.
Oglenski said “not all discussion was negative” in the company’s quarterly conference call, including talk of pricing gains with merchandise customers and good trends for nonlabor costs.
“While we know negative margin revisions in the near-term will likely present some relative challenges for CSX and other railroad equities, we see a potential bottom in freight demand as likely to provide an inflection point for U.S. carriers that currently trade materially below a market valuation,” he said.
“Long-term, we expect CSX to leverage best-in-class service to drive above industry volume growth, supporting a healthy outlook for patient investors.”
BMO Capital Markets analyst Fadi Chamoun is also optimistic about the long term, maintaining an “outperform” rating.
“With positive momentum on the service and operating front, and an energized culture and commercial strategy, we believe that CSX is well positioned to deliver strong positive leverage once demand conditions improve,” he said.
CSX’s stock fell by $1.25 to $32.46 on July 21 after the earnings report.
Johnson & Johnson reported higher second-quarter sales in its Jacksonville-based vision care unit, helped by the introduction of new contact lens products.
Total vision sales rose 6.9% operationally, adjusted for foreign exchange rates, to $1.31 billion and contact lens sales rose 6.6% operationally to $939 million.
“We are seeing the benefits of our recently launched innovations, such as Acuvue Oasys Max 1-Day multifocal, which is driving Johnson & Johnson’s market share growth in the large and growing presbyopia market,” Chief Financial Officer Joseph Wolk said in a conference call, according to a transcript posted by the company.
Jessica Moore, vice president of investor relations, said growth in contact lens sales “was partially offset by strategic portfolio choices and supply challenges, although these continue to improve.”
Jacksonville-based railroad technology firm Duos Technologies Group Inc. announced July 19 that former CSX Chief Financial Officer Frank Lonegro was appointed to its board of directors.
Lonegro spent 19 years with CSX and served as CFO from September 2015 to May 2019. He is currently CFO for Herndon, Virginia-based Beacon Roofing Supply.
“Emerging, high-growth companies are well served by Board members like Frank, who have the expertise necessary to mentor senior management and the vast industry knowledge to help guide and propel our growth in an industry as important and complex as rail,” Duos CEO Chuck Ferry said in a news release.
Lonegro’s appointment brings Duos’ board to five directors.
Thomasville, Georgia-based TC Federal Bank said it opened a full-service retail branch July 20 at 10970 San Jose Blvd. in Jacksonville.
The bank announced plans in 2022 to open a commercial loan production office in Jacksonville and follow that with a retail banking branch.
The Jacksonville office is the fourth full-service branch for TC Federal, which was established in Thomasville in 1934 and has additional branches in Tallahassee and Savannah.
Its parent company, TC Bancshares Inc., went public in July 2021 with an IPO of 4.9 million shares that were sold for $10 each.
The company reported assets of $430 million at the end of the first quarter.