First American Real Estate Solutions Merges With CoreLogic Systems, Inc.
—New, Combined Company to Deliver Comprehensive Line of Risk Management Analytics to the Mortgage Industry—
February 5, 2007, SANTA ANA, Calif.
The First American Corporation (NYSE: FAF), America’s largest provider of business information, today announced that it has merged its First American Real Estate Solutions (“RES”) division, a part of its FARES LLC subsidiary, with Sacramento, Calif.-based CoreLogic Systems, Inc., a leading provider of mortgage risk assessment and fraud prevention solutions. In 2006, RES and CoreLogic generated approximately $252 million and $74 million in revenues, respectively.
The new, combined company is majority owned by The First American Corporation through its FARES LLC joint venture with Experian Group Limited. CoreLogic’s stockholders, comprised of its management team and TA Associates, hold an 18 percent economic interest and two of 10 board of director seats. The co-founders of CoreLogic, Steve Schroeder and Kraig Clark, have assumed key roles in the newly formed organization. The merger is the largest transaction in a series of analytic company acquisitions and minority investments completed by RES in recent years as a part of a larger domestic and international mortgage risk analytics strategy.
“This merger is a major milestone in our strategy to revolutionize the mortgage risk management process,” said Parker S. Kennedy, chairman and chief executive officer of The First American Corporation. “This transaction unlocks value by creating a single, unified company with the unique data and predicative analytics resources that lenders, investors and consumers need throughout the mortgage lending and securitization process.”
Traditionally, risk associated with mortgage lending was managed through labor-intensive quality control and due diligence reviews. The combined company makes this process more efficient and effective by applying advanced data and analytics at every point in the lending process.
George Livermore, currently president of First American’s Property Information and Services segment, has been appointed president of the new company. Steve Schroeder, formerly chief executive officer of CoreLogic, will oversee the mortgage risk analytics business line for the company in the newly created role of executive vice president of risk management, reporting directly to Livermore. CoreLogic’s staff and operations will remain at its Sacramento, Calif., headquarters and all products offered by each company will continue to be available to customers.
“This newly created company has the combined expertise and assets that allow our clients to identify, quantify and manage risk in a more transparent and precise way than previously possible,” stated Livermore. “By providing innovative analytical solutions that touch every stage of the life of the loan, we will be able to help our lender, servicer and mortgage-investor clients become more competitive and profitable.”
Since 2004, RES has acquired analytics companies LoanPerformance, UK Valuation and Basis100 and has purchased minority stakes in The Bohan Group, ComplianceEase, BasePoint Analytics and Australia-based RP Data. Together, these companies provide data, analytics and decisioning solutions that address the most pressing challenges in mortgage risk management, including fraud prevention, collateral risk assessment, mortgage prepayment forecasting, regulatory compliance and due diligence reviews.
“Since co-founding CoreLogic more than eight years ago, I have seen the market for mortgage risk management analytics grow from a specialty market to one that is rapidly expanding into every facet of the mortgage lending process,” said Schroeder. “This merger provides the infrastructure and scale necessary to meet the growing market demands and enhances our ability to fulfill our mission of safeguarding and streamlining the mortgage loan process.”
Terms of the Transaction
FARES LLC owns approximately 82 percent of the economic interests of the combined company through the ownership of high vote Class B shares. CoreLogic’s stockholders own approximately 18 percent of the economic interests of the combined company through the ownership of Class A shares. In addition to the Class A shares, Corelogic’s stockholders received cash consideration of $100 million. To finance the cash consideration, FARES LLC has made a loan of $100 million to the combined company. FARES LLC secured bank financing for the $100 million loan to the combined company. CoreLogic’s stockholders will have registration rights that could result in the merged entity becoming public in the future.
The transaction is estimated to be breakeven from an earnings-per-share perspective to First American in 2007. Excluding the impact of transaction-related intangible amortization, the merger is expected to increase earnings by approximately $2 million in 2007. Lehman Brothers Inc., served as financial advisor and delivered a fairness opinion to First American.
To learn more about RES’s merger with CoreLogic, please visit www.firstamres.com/merger.
Sacramento, Calif.-based CoreLogic is the leading provider of residential mortgage risk management and fraud protection technology and services to the U.S. mortgage banking industry. CoreLogic quantifies the risk in more than 25 percent of U.S.-based originations annually on behalf of its clients, identifying more than $1.2 billion in potential loan loss in 2006. Since 1997, mortgage originators and the capital markets have relied on CoreLogic to increase loan performance by making smarter lending and purchase decisions. The company’s PowerLogic™ Risk Decision Platform delivers fast, efficient, accurate, easy-to-use solutions. CoreLogic was recognized within the Inc. 500 and FinTech 100 in 2005 and 2006. For more information about CoreLogic, visit www.corelogic.com.
RES, a member of The First American Family of Companies, is America’s largest provider of advanced property and ownership information, analytics and services. RES’ database covers more than 2,900 counties representing 99.1 percent of the U.S. population. With more than 600,000 users nationwide, RES products are used by companies to improve customer acquisition and retention, detect and prevent fraud, improve mortgage transaction cycle time and cost efficiency, measure the value of residential and commercial properties, identify real estate trends and neighborhood characteristics, track market performance and increase market share. RES forms a minority part of FARES LLC, which is 80 percent owned by First American and 20 percent owned by Experian. More information about RES can be found on the Internet at www.firstamres.com.
About The First American Corporation
The First American Corporation (NYSE: FAF), a FORTUNE 500® company that traces its history to 1889, is America’s largest provider of business information. First American combines advanced analytics with its vast data resources to supply businesses and consumers with valuable information products to support the major economic events of people’s lives, such as getting a job, renting an apartment, buying a car or house, securing a mortgage and opening or buying a business. The First American Family of Companies, many of which command leading market share positions in their respective industries, operate within five primary business segments, including: Title Insurance and Services, Specialty Insurance, Mortgage Information, Property Information, and Risk Mitigation and Business Solutions. With revenues of $8.1 billion in 2005, First American has approximately 2,100 offices throughout the United States and abroad. More information about the company and an archive of its press releases can be found at www.firstam.com.
Forward-Looking Statement Safe Harbor
Certain statements made in this press release, including those relating to the impact of the transaction on the Company’s 2007 earnings, are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may contain the words “believe,” “anticipate,” “expect,” “predict,” “estimate,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements include: interest rate fluctuations; changes in the performance of the real estate markets; access to public records and other data; general volatility in the capital markets; changes in applicable government regulations; heightened scrutiny by legislators and regulators of the Company’s title insurance and services segment and certain other of the Company’s businesses; consolidation among the Company’s significant customers and competitors; the Company’s continued ability to identify businesses to be acquired; changes in the Company’s ability to integrate businesses which it acquires; and other factors described in Part I, Item 1A of the Company’s annual report on Form 10-K for the year ended Dec. 31, 2005 and in Part II, Item 1A of the Company’s quarterly reports on Form 10-Q for the respective quarters ended Mar. 31, 2006 and June 30, 2006, in all cases as filed with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.