Merger denied, Stewart plans to rebuild
New CEO enacts a 100-day review
The recently appointed chief executive of Houston-based Stewart Information Services Corp. said the company will focus on rebuilding its business after a planned $1.2 billion acquisition was derailed by regulators after 18 months in the works.
“We’ve been remarkably resilient. But we have work to do,” Frederick Eppinger said in a Wednesday morning earnings call with investors.
Eppinger said the company has been distracted, and he announced a 100-day plan to examine all businesses lines to improve Stewart’s financial performance.
The $1.2 billion bid to buy Stewart, a title and real estate services firm, by Fidelity National Financial Inc. fell apart last month after the Federal Trade Commission filed an antitrust complaint. If combined, the companies would have commanded more than 40 percent of the U.S. title business.
Stewart is one of this region’s largest and oldest companies, dating to 1893. It began looking for a buyer in late 2017 amid flagging profits. The company had also faced pressure from activist investors who urged changes to the company amid claims of mismanagement and negative returns.
Eppinger, 60, replaced Matthew Morris as CEO last month. He has been a Stewart director since 2016, following his retirement as chief executive of Hanover Insurance Group.
“The transformation will not be completed overnight,” he said in the conference call, “but we won’t wait to get started.”
Without citing specifics, Eppinger said he would redirect capital to different areas of the business. He also said plans were in place to fill some positions that were lost since the merger announcement.
“We’ve already had a lot of calls and conversations with peo
ple we want back and are coming back and even from competitors talking about wanting to come too,” Eppinger said on the quarterly call to discuss earnings.
The company posted thirdquarter revenue of $560 million, up from $508 million a year earlier. Quarterly profits were $66.1 million, or $2.78 per share, compared with $17.6 million (74 cents) in the third quarter 2018.
The company reported $116 million in cash, up from $36.4 million a year ago. This increase, it said, was primarily due to higher profits, including a $50 million merger termination fee from Jacksonville, Fla.-based Fidelity National and lower accounts payable.
Stewart shares, which closed at $38.67 Tuesday, are down 8 percent since the beginning of the
year.
The company’s new chief expressed optimism about its thirdquarter results despite the timing of the failed merger.
“While refinancing orders benefited from rate-related tailwinds, our operating results were solid across the board, with year-overyear growth in direct commercial, residential and international operations, and sequential growth in our agency business,” Eppinger said in a statement. “With respect to the termination of our proposed merger with Fidelity National, customers across all of our channels have made it clear that they want Stewart as an independent force in the market. It is now up to us to capitalize on this opportunity by leveraging the power of our brand and people to grow and unlock value.”