THLee In Fourth Deal With William Foley’s Fidelity National

Not only was Fidelity National, the nation’s largest title insurance company, dealing to acquire a company that had been spun off by a company that Fidelity National had spun off in November 2006, but it also was reuniting with a longtime partner— the Boston buyout shop Thomas H. Lee Partners LP. It is the fourth time that Fidelity National, the Jacksonville, Florida, investment vehicle of William P. Foley II, has teamed with THLee, dating back to Fidelity National’s first major foray outside mortgage-related businesses, when it acquired the bank-technology arm of telephone company Alltel Corp of Little Rock, Arkansas, in April 2003.

Along the way, Fidelity National and THLee have worked together on a number of transactions, typically pursuing a strategy of rolling up fragmented industry sectors to form national leaders. And while Foley also has brought in a number of other buyout shops to co-invest in his deals—TPG Capital and Evercore Partners among them—THLee has been the most active of the group.

“He’s a tremendous partner,” Thomas Hagerty, a managing director at THLee, told Buyouts. “He has as good a combination of dealmaking skills and operating skills as anybody I know.” Hagerty said he could not comment on the Lender Processing Services deal, which remains in a “go-shop” period until July 7.

Indeed, it was THLee that brought Fidelity National into the auction for Alltel’s bank-tech operation, when Foley, who had built Fidelity National into the nation’s largest title insurer by rolling up regional insurers, wanted to branch out into the more highly valued bank-tech sector. Still, the buyout shop did not get a piece of the action until Fidelity National sold a 25 percent stake of the renamed Fidelity National Information Services to THLee and TPG Capital (then still known as Texas Pacific Group) as part of a dividend recapitalization in February 2005. The bank-tech company, which was spun off as an independent corporation in November 2006, grew through a series of acquisitions to become the No. 1 vendor in American Banker’s FinTech 100 by 2010.

THLee and Fidelity National teamed again in January 2006, when Evercore Partners joined the consortium in a deal for Sedgwick Claims Management Services Inc, which provides outsourced claims management services for workers’ compensation and other insurance issues. And less than two years after that, THLee and Fidelity National, this time with THLee in the lead, bought the payroll processor Ceridian Corp with the stated intention of growing through acquisitions. That holding remains in their joint portfolio.

But Fidelity National and THLee exited Sedgwick Claims Management in April 2010, handing the portfolio company off to Stone Point Capital and Hellman & Friedman in a $1.1 billion deal. Sedgwick Claims Management is now in the process of wrapping a $1.2 billion dividend recapitalization loan for its new sponsors.

In the meantime, the bank-tech spinoff Fidelity National Information Services floated its mortgage-servicing arm, Lender Processing Services, through an IPO in July 2008. That meant the servicing business was on its own when the subprime housing market triggered the financial crisis that year, and it has struggled financially as the housing market has sought new support since then.

Fidelity National announced a deal on May 29 to bring Lender Processing Services back into the corporate fold. Executives argue that the cross-selling opportunities between the mortgage processor and the title insurer will be greater than they were with the bank-tech operation.

“We have significant experience and familiarity with Lender Processing Services from our previous ownership of these businesses,” Foley said in announcing the deal. “This combination will create a larger, broader, more diversified and recurring revenue base for FNF and makes us the nation’s leading title insurance, mortgage technology and mortgage services provider.”

If no better deal emerges during the go-shop, and if shareholders of the two corporations agree, Fidelity National and THLee expect to close the Lender Processing Services deal by the end of the year.