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First American, Experian Form Data Company

Merger: Santa Ana real estate firm, Orange credit giant create the nation's largest information unit serving the two industries.

September 11, 1997|JOHN O'DELL | TIMES STAFF WRITER

ORANGE — Credit data giant Experian Inc. and real estate services leader First American Financial Corp. said Wednesday that they will mesh their real estate information subsidiaries into a new company with $450 million in annual sales.

The still-unnamed business will be the nation's largest provider of raw information and information processing software products to the real estate and mortgage industries. Terms of the deal were not disclosed.

Officials of the two companies said they don't expect many layoffs as they meld Orange-based Experian's real estate unit and its 1,000 employees with the First American operations and its 3,000 workers.

All of the individual operating units--including Anaheim-based Experian Real Estate Solutions--will remain in place, and workers won't be transferred, the company leaders said.

Santa Ana-based First American's stock climbed $4.63 a share Wednesday to close at $53 on the New York Stock Exchange on word of the deal, which industry analysts applauded.

The deal is a response to continued consolidation of the real estate and mortgage lending industries, as well as to pressure from consumers, lenders, real estate brokers and the government to lower the cost and speed the process of closing home purchases, said Van Skilling, Experian chairman and chief executive.

First American officials said they expect savings of as much as $20 million a year through the merger.

The company is likely to abandon Experian's competitors in the financial and credit data industry, purchasing information instead from its new joint-venture partner, officials said.

"This is first time that a big supplier of data has combined with a big user, and the efficiencies will be amazing," said Parker Kennedy, First American's president.

First American will own 80% of the new company, which will be run from First American Real Estate Information Service headquarters in St. Petersburg, Fla. Experian, a key operating unit of Great Britain's Great Universal Stores, will hold a 20% stake.

Other businesses of the respective companies, including Experian's credit division and First American's title insurance operations, will not be part of the transaction.

The venture will combine Experian's property data and title information services with all of First American's real estate information businesses except its mortgage loan servicing software division.

Experian is an industry leader in the development of software and database products used to establish property values, determine credit-worthiness of borrowers and analyze market trends.

First American Financial has property appraisal, tax service and title businesses. A subsidiary, First American Credco, is the nation's largest provider of mortgage credit information.

"It's a really good deal from a strategic point of view," said analyst James E. Inglis of Philo Smith & Co. in Stamford, Conn.

The new joint venture will be an instant leader in developing and providing online information and decision-making products to mortgage lenders, he said.

"We've had all these bank consolidations that have left us with a bunch of really big mortgage lenders that want consistent services across the country, and ideally, they want them all online," he said.

Skilling and the First American officials said they expect the deal to increase sales and earnings at both companies.

But Kennedy was reluctant to say how soon the numbers would increase. For now, he said, he is comfortable that First American Financial will meet analysts' expectation of 1997 earnings in the neighborhood of $4.69 a share.

The transaction was approved Wednesday by both companies' boards of directors but is subject to a definitive agreement and regulatory approval.

Skilling said he doesn't expect government objections because the businesses don't overlap. He also said he expects the final agreement to be hammered out "in a matter of weeks, not months."

John Long, now president of St. Petersburg-based First American Real Estate Information Services Inc., will be president of the new company.

Dennis Gilmore, a regional vice president of First American's title insurance subsidiary, will become general manager of the operations that Experian is contributing to the venture. Longtime Experian executive Don Miller, now president of those operations, will return to Experian's main credit and marketing information units in an as-yet undisclosed position.

First American Financial, with $1.6 billion in annual sales, has more than 10,000 employees in more than 400 branch offices in the United States and abroad.

Experian has almost $900 million in annual sales and employs about 7,000 people in more than 80 offices in the North America, Europe, Asia and Africa.

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