Troubled Doma to sell to Title Resources Group for $85M

Doma, which went public in 2021 with hopes of not just taking on the big four title underwriters but expanding into other real estate transaction-related businesses, is ending its run, selling itself to privately held Title Resources Group for $6.29 per share.

"The company's goal to disrupt the title industry proved elusive and Doma has generated significant losses since it became public," wrote Bose George, who performs analysis on title companies for Keefe, Bruyette & Woods. He does not cover Doma regularly.

"Historically there has been limited [merger and acquisition activity] in the title insurance space, and we expect that to continue to be the case," George added. The deal is valued at almost $85 million, he said.

The transaction was announced after the market closed on March 28. Doma closed trading that day at $4.54 per share.

The next day the stock market was open, April 1, Doma hit a high of $6.12 per share, close to but still below the sale price.

Doma's underwriting operations, and its technology division, which is likely to be renamed Doma Technology LLC, or Doma TechCo for short, are expected to operate as subsidiaries of TRG.

Doma TechCo will be operating on a separately capitalized basis as Hudson Structured Capital Management (also known as HSCM Bermuda) will invest in Doma TechCo.

The most recent data on title insurer market share, from the American Land Title Association, which is covering the third quarter of 2023, showed TRG ranked eighth at 2.9% and Doma tenth with a 1.8% share. On a pro forma basis, the combination would be close in size to the largest independent title underwriter, Westcor Land Title Insurance, which had a 4.8% share for the period. Note that this is a ranking by underwriter, not parent company, and not just the big four firms, but several independents as well operate multiple units.

First American Title Insurance had the largest share in the period at 21.6%. But a trio of Fidelity National units had a combined total of 29.9%.

Doma was rebranded from its former name, States Title, in 2021. Homebuilder Lennar was a major shareholder in the company due to States' purchase of North American Title.

Lennar through its affiliates has 25% voting power of Doma's common stock and it has agreed to vote in favor of the deal. After the transaction, Lennar will hold 8.36% of the merged companies.

Meanwhile, TRG has ties to the real estate industry as a former subsidiary of Anywhere Real Estate (which was formerly known as Realogy. At the time that Centerbridge Partners acquired 70% of TRG, Anywhere held on to 30%. An Anywhere competitor, Berkshire Hathaway-owned HomeServices of America, has since purchased an undisclosed interest in TRG.

At the time when its special purpose acquisition company merger with Capitol Investment Corp. V was announced in March 2021, Doma CEO Max Simkoff predicted the company would grow to 330,500 closed orders per year in 2023 from 92,400 in 2020. But Doma was never able to gain traction in a title insurance market that consolidated due to the vast decline in mortgage originations.

Doma had divested its own internal title production business in multiple transactions last year to Williston Financial Group, Near North Title and Capital Title of Texas. As a result, it no longer reported open or closed order counts. It still sourced business through relationships with independent title agents.

Its closed orders in 2023 totalled 71,953, down from 136,248 in 2022; Doma had projected 212,200 for that year when the SPAC deal was announced.

Simkoff's ambitions also included Doma moving into adjacent businesses such as appraisal and home warranty.

But Doma was never able to achieve profitability as a public company and it retrenched operations several times, not just with the sales of the production offices.

In its most recent quarter, Doma lost $18 million for the period ended Dec. 31, 2023, an improvement from the third quarter, when it lost $22 million.

During the earnings call, Simkoff made waves by saying Doma supported Pres. Biden's title waiver pilot initiative. The company has an upcoming technology pilot with Fannie Mae.

"Since Doma's technology unit will now be a subsidiary of TRG, we anticipate no change in its expected role in the Fannie Mae pilot," KBW's George wrote.

Doma's sale will leave just the big four family title insurers operations — Fidelity National, First American Financial, Stewart and Old Republic International (which also underwrites general insurance) — and Investors Title as publicly traded companies.

In addition, private mortgage insurers Radian Group and Essent Group own title insurance underwriting companies.

National Mortgage News made requests for comment from Doma, TRG and Lennar, which were not returned.

However in the press release, Simkoff said "Today's announcement is a win for Doma's stockholders and for both companies' employees and customers."

From TRG's perspective, "We look forward to partnering with the Doma team and providing excellent underwriting services to Doma's many strong agents," Scott McCall, its president and CEO, said.

The transaction has a 50-day go-shop provision in which Doma can solicit for better offers. The contemplated end date for the deal is Sept. 28.

The contract calls for a termination fee of nearly $3.2 million, unless a superior proposal is received during the go-shop period; in that case the fee would be approximately $1.8 million.

Advisors for the deal included Houlihan Lokey Capital as financial advisor to the special committee of Doma's board, with Latham & Watkins as its legal counsel. Davis Polk & Wardwell was the company's legal counsel and Mayer Brown as insurance regulatory counsel. Willkie Farr & Gallagher served as legal counsel to TRG and Morrison Foerster had the same role for the Lennar stockholders.