First American Corp. (FAF) has offered to purchase its 74%-owned
credit-information provider First Advantage Corp. (FADV) unit to
increase "financial flexibility," ahead of the company's planned
breakup.
The offer, which values all of First Advantage at $837 million,
values the stock at $14.04 each, a 10% premium to Friday's closing
price. First American's bid is 0.5375 share of its stock for each
First Advantage share.
"Acquiring the minority interest in First Advantage will enhance
our financial flexibility, reduce organizational complexity and
provide greater overall operational efficiency," said First
American Chairman and Chief Executive Parker S. Kennedy. The deal,
if consummated, would boost First American's 2010 earnings, the
company said.
First American and the rest of the title-insurance industry
continues to be roiled by the housing-market downturn. The sector
gets much of its business via mortgage originations, which have
been slumping along with home sales. To help cope, First American
has been tightening expenses and cutting personnel costs in an
effort to improve efficiency.
The company in January announced it would split up, creating
public firms focused on information solutions and financial
services.
A First Advantage spokesman couldn't immediately be reached for
comment.
-By Mike Barris, Dow Jones Newswires; 212-416-2330;
mike.barris@dowjones.com