The FTC drops case against ICE’s acquisition of Black Knight

The Federal Trade Commission (FTC), Intercontinental Exchange Inc. (ICE) and Black Knight jointly stipulated to dismiss a federal court case against ICE’s $11.7 billion proposed acquisition of Black Knight, clearing a major regulatory hurdle that should allow the deal to go through.

“The joint stipulation dismisses the federal complaint and dissolves the temporary restraining order that was previously in place, allowing ICE, Black Knight and the FTC to continue working toward a final settlement agreement resolving FTC’s challenge to the acquisition,” ICE and Black Knight said in a statement on Monday. 

Following ICE’s announcement of its plans to acquire Black Knight in May 2022, the FTC sued ICE in March 2023 based on two main allegations. 

The companies that have the two largest loan origination systems (LOS) would allegedly raise costs to lenders which would then be passed to homebuyers; and the deal would eliminate competition for product, pricing and eligibility engines (PPEs) and other various ancillary services that are add-ons to LOS, the FTC alleged. 

In April 2023, the agency petitioned a California federal court to issue a temporary restraining order (TRO) and preliminary injunction (PI) that prevents ICE from going forward with the deal to buy Black Knight. The goal was to give the commission time to pursue in-house litigation against the merger. A preliminary injunction hearing was scheduled for August 14 – 16.

ICE and Black Knight has since announced that it will sell Black Knight’s LOS Empower business and Optimal Blue to a subsidiary of Constellation Software Inc. to address antitrust concerns, leading to speculations of a possibility that the FTC will settle on the merger deal with ICE and Black Knight. 

Keefe, Bruyette & Woods (KBW) previously noted that the divestiture of Black Knight’s Optimal Blue leaves the FTC with a weak case as it remedies the remaining horizontal overlap cited in the FTC’s complaint with a competitive buyer.

“While a formal settlement agreement has not yet been finalized, today’s announcement that the parties have dismissed the federal court case and temporary restraining order indicates that a settlement is nearing, likely by August 25, which is in line with our base case assumption,” Ryan Tomasello, managing director at KBW said in a note on Monday morning. 

The FTC, ICE and Black Knight will look to come to mutually acceptable terms by August 25. 

If the merger goes through, it would be the second massive mortgage tech deal for ICE, which acquired Ellie Mae from Thoma Bravo for $11 billion in 2020.