(Bloomberg) -- David Einhorn’s Greenlight Capital is betting against Wall Street in a wager that Intercontinental Exchange Inc.’s $11.7 billion acquisition of Black Knight Inc. is most likely to go through.
The hedge fund added a new small long position in the mortgage software company, according to a copy of its quarterly letter seen by Bloomberg. While Black Knight’s deal with ICE faces an antitrust challenge from US regulators, Greenlight estimates the chances of the deal succeeding “at closer to 75%,” even though the market is only prices in a little bit better than 1-in-4 odds.
Black Knight closed at $54.40 Thursday, more than 27% below ICE’s cash-and-stock offer that values the company at roughly $75 a share. The stock has slumped over 10% since the Federal Trade Commission sued to block the transaction in early March.
The deal is now expected to head to the court for a federal judge to determine its merits. ICE has offered to divest Black Knight’s loan origination business in a bid to address regulatory concerns.
Greenlight isn’t alone in its bullish wager about the deal’s outcome. Some merger arbitrage strategists and analysts also held the view that the companies have a shot at prevailing in court. A representative for the firm declined to comment further.
If the deal falls apart, Greenlight expects Black Knight to be worth about $51 per share, conservatively. The hedge fund acquired its stake for an average price of $60.59, the letter said.
©2023 Bloomberg L.P.
Advertisement