The Jacksonville, Fla., banking technology and mortgage title insurance vendor Fidelity National Financial Inc. plans a partial spinoff of its title insurance operations.
Fidelity National announced a restructuring plan Tuesday that includes a taxable distribution of 17.5% of the insurance business to shareholders and the assumption of $500 million of debt.
In many ways the plan resembles last year's proposal to spin off the technology unit, Fidelity Information Services. That proposal was shelved when Fidelity National sold a quarter-stake in the unit to a pair of private equity firms.
William P. Foley 2d, Fidelity National's chairman and chief executive, said the transaction is aimed at maximizing the share price of both the parent and the title insurance subsidiary.
"It has been difficult to appreciate the full value of our distinct business lines in a single, publicly traded security," Mr. Foley said in a press release. After the transaction the two lines would be "valued separately, based on their respective profitability, growth, risk, and return profiles," he said.
Matthew Josefowicz, a senior analyst and manager of the insurance group with the Boston market research firm Celent Communications LLC, said the new spinoff plan was "designed to maximize investor value" rather than serve a business need.
"Valuations of insurance companies are typically much more conservative" than those of technology and services companies, Mr. Josefowicz said. Fidelity National's technology and services businesses "would be valued differently if they weren't on the same balance sheet," he said.
When Fidelity National reported its first-quarter earnings last month, Mr. Foley said he was "not happy" that it was thought of primarily for its title insurance business.
Mr. Josefowicz said the plan clearly reflects the CEO's desire for Fidelity National to be perceived differently.
Fidelity National did not respond to a reporter's phone calls but had scheduled a conference call with analysts for Wednesday morning to discuss the news.
Under the plan, Fidelity National would create a title insurance holding company that would hand over 17.5% of its stock to current Fidelity National shareholders through a taxable distribution. (Fidelity National would keep the rest.)
Each of the parent's shares would be worth 0.175 share of the insurance holding company, which would also be based in Jacksonville and would borrow $500 million through a new bank credit facility, then lend $250 million to the parent.
Mr. Foley would be the insurance company's chairman, and Randy Quirk, Fidelity National's president, would be the chief executive.
To boost its stock price, Fidelity National announced a plan last May to spin off Fidelity Information Services through a public offering. But in December the parent said it had shelved that plan and announced a new one that involved selling 25% of the unit to two private equity firms, Thomas H. Lee Partners LP of Boston and Texas Pacific Group of Fort Worth, for $500 million.
The restructured unit borrowed $2.8 billion, $2.7 billion of which went to Fidelity National. It used $1.8 billion of that in March to pay investors a $10-per-share dividend.
