Hedge fund manager David Einhorn bet big that Intercontinental Exchange Inc. would succeed in taking over mortgage software company Black Knight Inc. despite US antitrust opposition, and his wager is set to pay off.
(Bloomberg) — Hedge fund manager David Einhorn bet big that Intercontinental Exchange Inc. would succeed in taking over mortgage software company Black Knight Inc. despite US antitrust opposition, and his wager is set to pay off.
Greenlight Capital, Einhorn’s firm, has reaped more than $20 million on the trade since the end of June, according to data compiled by Bloomberg. The fund manager said in its April letter to investors that it had bought shares of Black Knight, and said in a filing for the second quarter it had added to its position, bringing its holdings to around 1.34 million shares.
ICE and Black Knight said on Friday that they expect to combine on Sept. 5, after they entered a consent agreement with the Federal Trade Commission. In March, the US had sued to block the deal.
The FTC had argued ICE’s owning Black Knight would raise prices for mortgage lenders and homebuyers by giving the companies a significant position in the market for home loan software. ICE bought mortgage software provider Ellie Mae in 2020.
Greenlight wrote in a letter to investors in April that the market was pricing in a roughly 25% chance of the deal closing, but the money manager thought it was closer to 75%. The firm said in that letter that it had bought a stake for an average price of $60.59 a share. In its latest quarterly filing, it disclosed it had added to its position since then.
A representative for Greenlight declined to comment.
Read: Einhorn’s Greenlight Defies Skeptics in Black Knight Deal Bet
As ICE faced off with regulators, Black Knight’s shares oscillated, closing as low as $53.40 in May. But they climbed after that, jumping in July after the companies agreed to sell the Optimal Blue business to help resolve antitrust concerns, on top of the Empower loan origination system business they had agreed in March to sell.
On August 7, the companies said the FTC had agreed to dismiss litigation and return to negotiations, and last week a settlement was reached. Black Knight’s shares traded as high as $75.87 on Wednesday morning in New York, close to the level of about $76 where the deal is expected to close.
At least some other traders agreed with Einhorn that ICE would likely be successful in buying the company. Since the FTC had a major legal setback in blocking Microsoft Corp.’s takeover of Activision Blizzard Inc. in July, it has started several settlement talks with other companies.
The FTC also paused its in-house proceedings to block Amgen Inc.’s $28 billion takeover of Horizon Therapeutics Plc, boosting the deal’s implied probability of closing to more than 90%.
Read: Regulators Sue to Stop ICE-Black Knight Deal. Traders Don’t Care
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