MIAMI—Fidelity National Financial laid down about $2.9 billion to acquire Lender Processor Services, Inc., a provider of integrated technology, services, data, and analytics to the mortgage and real estate industries. The price for all outstanding common stock is $33.25 per share.

Under the terms of the deal, Fidelity will pay 50% of the consideration for the Lender shares in cash and 50% in shares of Fidelity stock. The purchase price represents a 19% and 25% premium, respectively, to the prior 30-day and 60-day average closing prices for Lender's stock through May 22. May 22 was the last trading day before media reports regarding a potential transaction started circulating.

The companies are no strangers. In fact, Fidelity chairman William P. Foley, says he has “significant experience and familiarity” with Lender from its previous ownership of these businesses. He expects the combination to create a larger, broader, more diversified, and recurring revenue base for Fidelity.

“We believe there are meaningful synergies that can be generated through the similar businesses in centralized refinance and default related products, elimination of some corporate and public company costs and the shared corporate campus,” Foley says. “We have set a target of $100 million for cost synergies and are confident that we can meet or exceed that goal.”

At closing, Fidelity will combine its ServiceLink business with Lender in a new consolidated holding company. Fidelity will sell a 19% minority equity interest in the new consolidated holding company to funds affiliated with Thomas H. Lee Partners, L.P. for about $381 million in cash. Fidelity will retain an 81% ownership interest in the new enterprise.

"As the mortgage industry continues to face increasing regulation, participants in the industry are seeking out those strategic partners who offer quality, comprehensive solutions, a strong balance sheet and a commitment to innovation," says Hugh Harris, president and CEO of Lender. "The combined LPS and FNF offer comprehensive technology and services to address many of the challenges facing the industry today and the best solutions to support future success."

It's not a done deal yet. The acquisition agreement includes a "go-shop" period effective through July 7, 2013, during which Lender can actively solicit alternative acquisition proposals from third parties. The acquisition agreement also contains a break-up fee equal to about 1.25% of the total equity value of $2.9 billion payable to Fidelity if Lender terminates the acquisition agreement based on receiving a superior proposal during the "go-shop" period.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC acted as financial advisors and are providing committed financing to FNF on the transaction. Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co. served as financial advisors to Lender.