The First American Corporation (NYSE: FAF), the nation's largest data provider, today announced that it has signed a definitive agreement to acquire Basis100 Inc. (Toronto: BAS), a major supplier of automated valuation models (AVM) to the U.S. mortgage lending industry. The transaction, which is subject to approval by Basis100's shareholders and debenture holders, is expected to close in the third quarter of 2004.
"Demand for real estate valuations and other data-driven products is increasing as our customers strive to improve service and drive cost out of their processes," said Parker S. Kennedy, president and chief executive officer of The First American Corporation. "The addition of Basis100 and its products to our existing line will make First American the nation's number one provider of automated valuation solutions."
Based on current mortgage lender and investor guidelines, an estimated 25 percent of mortgage loans qualify for an AVM in lieu of a standard appraisal. All of the top mortgage lenders have incorporated AVMs into their business systems and processes and, as a result, the AVM market has doubled each year for the last three years. Growth is expected to accelerate as lenders take advantage of investor acceptance of AVMs.
The transaction will be immediately accretive to First American earnings. First American will acquire 100 percent of the equity of Basis100 through a cash payment of approximately $33 million to current holders of Basis100 common stock, warrants and options. Assuming the satisfaction of certain conditions, each Basis100 shareholder will receive approximately CDN$1.00 for every share acquired by First American. Additionally, First American will redeem outstanding Basis100 convertible debentures for a cash payment of approximately $11 million. By eliminating the overhead costs associated with duplicate facilities, infrastructure and administrative functions, First American expects to benefit from significant cost synergies over the next six months that will result in total pretax earnings of $10 million on an annualized basis.
"We have great respect and appreciation for the products, talented people and unique data we will add to our business through this transaction," said George Livermore, president of First American Real Estate Solutions (RES). "We plan to maintain the products so that clients can count on receiving the same consistent and reliable performance, while benefiting from the additional value we can deliver by offering them more choices and a world-class technology infrastructure that ensures the highest levels of reliability and support."
As the largest data provider in America, First American gathers both proprietary and publicly accessible data and forms it into useful, decision-ready information products and services for a wide variety of industries and consumers. From title, mortgage and property information to credit and background screening information, First American provides data resources to support the major economic events in people's lives.
"This is a win-win for both our shareholders and clients," said Michael Johnston, president and chief executive officer of Basis100. "First American RES has a proven track record of success in the development and delivery of automated valuation models, and they are well-equipped to support the growing demand for a range of analytical products for the mortgage lending industry."