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Intercontinental Closes MERS Buyout, Boosts Service Offering

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Intercontinental Exchange, Inc. (ICE - Free Report) has announced that it has bought the remaining stake of MERSCORP Holding, Inc., owner of Mortgage Electronic Registrations Systems, Inc. (MERS).  The company already has a major stake in MERS since 2016. However, terms of the transaction remain undisclosed.

MERSCORP Holdings is a privately-owned corporation, which owns and operates MERS System and all its products. MERS System is a national electronic registry that follows the changes in servicing rights and beneficial ownership interest in U.S.-based mortgage loans.

Addition of MERS will help Intercontinental Exchange serve its customers better as the U.S. mortgage finance industry is gradually shifting to more digital mortgages and electronic notes from a paper-based process.

Beginning this month, the acquirer has transitioned MERS System’s operation to its own data centre. Nonetheless, this transaction will not have any material impact on Intercontinental Exchange’s results.

Intercontinental Exchange has an impressive track of pursuing strategic buyouts, which enlists integrations of CLE, Interactive Data Corporation, Trayport, Standard & Poor’s Securities Evaluations, Inc., or SPSE, TMX Atrium, National Stock Exchange and Virtu BondPoint. The most significant of these deals is the acquisition of NYSE in Nov 2013 that strengthened Intercontinental Exchange’s position as a premier stock trading platform. The acquisition of TMC Bonds in May 2018 helped the acquirer fortify its fixed income market trading.

Discreet M&A activity has not only enhanced Intercontinental Exchange’s portfolio but has also enabled the company to draw and benefit from expense synergies. Management is on track to achieve at least $30 million in expense synergies by 2018-end.

Also, adopting an inorganic route confirms a solid capital position for the company and helps it chase developments to ramp up its growth profile. The company has generated $1.2 billion operating cash flow during the first half of 2018 (up 13% year over year), which it has effectively deployed in strategic investments and enhancement of shareholder value.

Shares of this Zacks Rank #3 (Hold) stock have gained 7.6% year to date, underperforming the industry’s rally of 12.5%. Nonetheless, we expect successful consolidations, organic growth initiatives, strong operational performance and a solid capital position to drive its shares higher.

Stocks to Consider

Better-ranked stocks from the finance sector are Athene Holding Ltd. (ATH - Free Report) , Cigna Corporation (CI - Free Report) and Euronet Worldwide, Inc. (EEFT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Athene Holding issues, reinsures and acquires retirement savings products in the United States. The company’s average positive surprise is 15.03% for the last four quarters.

Cigna provides insurance and related products and services in the United States and globally. The company’s average earnings surprise is 15.61% for the preceding four quarters.

Euronet Worldwide provides payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers, internationally. The company’s average beat is 0.38% for the trailing four quarters.

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