(Reuters) - At least seven firms, mainly private equity, have shown interest in data and analytics company CoreLogic Inc (CLGX.N), attracted by its growth businesses and relatively cheap valuations.
Analysts are divided over whether CoreLogic -- which has hired boutique advisory firm Greenhill to explore a possible sale -- may be sold whole or in pieces.
Spun off from First American Corp in June 2010, CoreLogic put itself in the shop window due to a U.S. housing slump that prompted it last month to slash its full-year outlook to below analysts’ expectations.
At least two strategic buyers and five private equity firms have shown interest in the company, said a source with knowledge of the process. The source, who asked not to be identified because of the sensitivity of the matter, declined to name the companies.
CoreLogic declined to comment for this article.
Santa Ana, California-based CoreLogic operates in two segments: business and information services, such as property tax data, flood data, and appraisal and default management; and data and analytics, including property and mortgage securities information, and credit solutions.
Its second-quarter revenue fell 4 percent year-on-year to $396 million, as a housing slump brought down mortgage originations and hit earnings.
But the data and analytics business showed continued growth in risk and fraud services.
“I think their complete business is more valuable than in pieces,” said Morningstar analyst Brett Horn, noting the parts of the business dealing with residential real estate, mortgages and the processing and data market all support each other.
“Just selling these pieces separately to different buyers is probably not going to be the most effective way to realize their value.”
CoreLogic shares sank to an 11-year low of $7.64 late last month after the company slashed its outlook, but have since partly recovered on news the company might be sold.
The stock last traded at $10.79, but is still down 40 percent year-to-date, underperforming an 11 percent drop on the S&P Midcap Data Processing & Outsources Services sub-index .4GSPTKDP.
Some analysts reckon the shares look undervalued because investors have focused on this year’s earnings in isolation.
One CoreLogic shareholder said, ultimately, it comes down to price.
“If it’s keen to sell itself for $14 a share and asks shareholders to vote, I’d say ‘No’. But if they say we’re getting a great price, then I’d support it,” said the shareholder, who asked not to be named.
Private investment firm TPG Capital paid about 11 times EBITDA when it bought MDA DataQuick, a CoreLogic competitor in business and information services, last year.
That makes it possible for CoreLogic to get 11-12 times its multiple from some private equity firm, the investor said, suggesting a price of above $18 a share.
Morningstar’s Horn believes CoreLogic could even fetch a 30 percent premium -- around equal to the stock’s trading level just 7 weeks ago.
“When you look at Lender Processing Services LPS.N, Fiserv (FISV.O), Experian (EXPN.L), Verisk Analytics (VRSK.O), D&B (DNB.N) and Equifax (EFX.N), companies that do the same kind of work, they trade at about 8 times EBITDA, and CoreLogic is priced far below that on a consolidated basis,” the investor said.
The businesses CoreLogic is most likely to want to sell are the defaults -- sitting on record levels of distressed mortgages and expected to drag down overall earnings -- and appraisals, said Horn.
Stephens Inc analyst Carter Malloy said CoreLogic’s unique data and analytics assets, which are showing growth, would likely attract most interest, however.
“The risk and fraud segment is really the crown jewel, and that’s what I think people are really interested in,” the CoreLogic shareholder said.
Keeping pace with booming demand for data storage and analytics companies, Teradata Corp (TDC.N) this year bought Aster Data for $263 million, and Aprimo for $525 million, while U.S.-based payment processor FIS had planned to buy UK software firm Misys MSY.L, but later opted instead for a share buy-back.
Tempted bidders will also have to be aware of outstanding issues at CoreLogic.
Such as the $129 million in damages sought by the Federal Deposit Insurance Corp (FDIC) over CoreLogic’s alleged negligence in preparing appraisals for Washington Mutual.
“Assuming these disputes remain outstanding, we believe any buyer of CoreLogic would have to be comfortable taking on this potential liability,” said Greg Smith, analyst at Sterne Agee.
CoreLogic shareholders are also pressing for management changes as the company went six months without a chief financial officer.
CoreLogic, which has been divesting non-core assets, sold its employer services and litigation support business last December, and was paid $50 million in July by Cognizant Technology Solutions (CTSH.O) for its India-based CoreLogic Global Services Pvt Ltd unit.
Reporting by Aditi Sharma and Rachana Khanzode in Bangalore; Editing by Ian Geoghegan