By David French and Nivedita Balu
(Reuters) - Intercontinental Exchange Inc <ICE.N> (ICE) said Thursday it would spend $11 billion (8.4 billion pounds) to acquire Ellie Mae, betting the U.S. mortgage technology platform would benefit from significant automation of the home financing process.
Strengthening its position in mortgage servicing has been a key focus for the owner of the New York Stock Exchange in recent years, having made two acquisitions since 2016 to support its business in the sector.
The purchase price is a significant jump on the $3.7 billion which private equity firm Thoma Bravo laid out to take Ellie Mae private 18 months ago, although ICE Chairman and Chief Executive Jeffrey Sprecher called the transaction a "one-of-a-kind opportunity."
Sprecher told an analysts' call that the onset of the global coronavirus pandemic this year had accelerated the sector's digitization, as it has prevented functions around buying homes or refinancing loans from being completed in-person.
"(Thoma Bravo) had an asset that was a real winner, so we had to do some real convincing that this is the moment in time," Sprecher said.
Pleasanton, California-based Ellie Mae operates a cloud-based platform which supports all aspects of mortgage origination.
ICE, with its MERS and Simplifile units, has previously focused on mortgage servicing after completion. The acquisition will allow it to offer services across the mortgage process.
Buying Ellie Mae is expected to be accretive to ICE's adjusted earnings per share in the first full year of ownership, with ICE Chief Financial Officer Scott Hill telling analysts the company expects Ellie Mae could grow 8-10% every year for the next decade.
The deal though will require ICE to suspend its stock buy-back program until the second half of 2022, when its debt-to-EBITDA ratio returns to around 3.25-times.
ICE will fund its Ellie Mae purchase, which is expected to close before the end of 2020, predominantly using cash, with 16% of the value covered by the issuance of new ICE common stock to Thoma Bravo.
Credit Suisse, Goldman Sachs and Wells Fargo were among the advisers to ICE, with JPMorgan Chase and Jefferies supporting Thoma Bravo and Ellie Mae.
(Reporting by David French in New York and Nivedita Balu in Bengaluru; Editing by Tom Brown and Rosalba O'Brien)