(Updates with First Advantage response and updates stock
prices.)
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.
First Advantage said the offer is being reviewed by a committee
of independent directors. Its shares jumped 18% to $15.05 while
First American dropped 1.8% to $25.66.
First American Chairman and Chief Executive Parker S. Kennedy
said the deal, if consummated, would streamline the company as well
as boost its financial flexibility. Earnings next year are also
seen being increased by the purchase.
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.
-By Mike Barris, Dow Jones Newswires; 212-416-2330;
mike.barris@dowjones.com