Feds go to court to put hold on ICE-Black Knight deal

The Federal Trade Commission has filed for a temporary restraining order and preliminary injunction to halt the Intercontinental Exchange-Black Knight transaction from taking place prior to its administrative action.

"Absent such relief, ICE and Black Knight have represented that they will close the acquisition immediately following a vote of Black Knight shareholders scheduled for April 28," according to the filing made in the Federal District Court for the Northern District of California on April 10.

The above notwithstanding, both sides have agreed to a hold on the deal until 11:59 p.m. eastern time on the second day following a judge's ruling on this motion or until after the date set by the District Court, whichever is later.

In a joint statement, ICE and Black Knight said, "The FTC's move was expected. We look forward to presenting our case to close the deal in federal court and are confident in the outcome."

This latest move in the game of chess between the two parties follows separate March 20 filings by ICE and Black Knight that state the FTC handling the proceeding internally violates the U.S. Constitution on several counts, including due process, by not having it heard by a neutral party.

That was in response to the March 9 FTC complaint, which in anticipation, Black Knight and ICE arranged for the sale of the Empower loan origination system to Constellation Software. This divestiture is similar to one done in a case the Justice Department lost, attempting to halt the merger of UnitedHealth and Change Healthcare.

Because of the Empower sale, the deal value was reduced to $11.7 billion, or $75 in per share in cash and stock. On April 10, Black Knight closed well below that, at $57.76 per share; when it opened the following morning, it slipped to $57.24.

It is not just the potential LOS market share that the FTC alleged is a problem. It is also going after the combination's supposed domination in the product and pricing engine business. Black Knight owns Optimal Blue, while Encompass has an internal PPE for its users only. Other deal opponents have noted the breadth the combination would have from origination through closing, servicing and secondary marketing.

The administrative hearing is supposed to start on July 12 "and will provide all parties a full opportunity to conduct discovery and present testimony and other evidence regarding the likely competitive effects of the acquisition," the TRO request said.  

However, according to a Federal District Court docket downloaded from PACER, the initial case management conference is set for July 14 in San Francisco. The case was assigned to Magistrate Judge Joseph Spero.