Fidelity National Will Slash Jobs in Wake of Merger
Wasting no time after closing its $1.1-billion merger earlier this week, Fidelity National Financial Inc. said Wednesday that it plans to slash about 1,500 jobs nationwide--including as many as 100 in Southern California--over the next 12 months as it consolidates operations with former rival Chicago Title Corp.
The Irvine company, which is now the nation’s No. 1 title insurer, also said it will move quickly to use its larger size and financial resources to launch new products nationwide, such as homeowners insurance, and to accelerate efforts to move its business to the Internet. One new Web site will sell real estate records, including mortgage and tax lien information about most U.S. homes, to lenders, real estate agents and consumers.
“We’ve always had the entrepreneurship to do this. Now we have the muscle,” said Fidelity Chairman William P. Foley II, whose aggressive deal making over the past two decades took the company from No. 48 to No. 1.
The Chicago Title deal, which closed Monday, gives Fidelity 1,000 offices nationwide and a 30% share of all title insurance policies, which are typically purchased in every real estate transaction.
The merger also triples Fidelity’s investment portfolio to nearly $2 billion, providing an extra $100 million a year in returns. The money will not only fund Fidelity’s new ideas but will also help Fidelity survive the current real estate market, which has slowed in response to rising interest rates.
Detailing the expected layoffs for the first time, Fidelity said it expects to slash about 150 jobs this week and another 80 by the end of the month. As many as 1,500 will disappear within 12 months, mostly at the former Chicago headquarters but also in some regional administrative offices in Texas and California.
About 40 jobs at a former Chicago Title facility in Pasadena were eliminated earlier this week and another 50 will probably be cut at Fidelity’s Irvine headquarters, Foley said. The company’s Santa Barbara office, where most executives are based, is likely to add about 100 jobs in the restructuring.
The layoffs--which are higher than expected because of the slowing real estate market--are the linchpin to Fidelity’s 12-month goal of squeezing $75 million in expenses out of the combined company.
One of Fidelity’s biggest challenges over the next year will be hanging onto Chicago Title’s customers and preserving the combined company’s 30% market share.
“Whenever you have a consolidation like this, there’s always fallout,” said Jim Maher, executive vice president of the American Land Title Assn., an industry trade group.
For instance, LandAmerica Financial Group catapulted to No. 1 after a 1998 merger. But it quickly fell behind Santa Ana-based First American Financial Corp., which hired many of LandAmerica’s frustrated or laid-off title agents, according to Maher.
First American, which is now the No. 2 title insurer with a 22% market share, is betting on a similar opportunity with the Fidelity-Chicago Title deal.
“People always feel displaced,” said Parker Kennedy, president of First American. He noted that his company has been knocked off the No. 1 perch by mergers three times before and that each time the company reclaimed its lead position.
To reduce the fallout, Fidelity is leaving its branch offices largely untouched, even if that means Fidelity and Chicago Title agents compete in the same neighborhoods, officials said. Only one title office, in Salem, Ore., was consolidated as part of the merger.
Both companies will retain their names, their cultures and even their own employee bonus programs.
“We’re leaving the field offices alone and slamming together the corporate offices,” said Patrick Stone, Fidelity’s new president. “We don’t want to do anything that will disrupt the people that generate the revenue and have the relationships with customers.”
Stone, Fidelity’s chief operating officer, was also named president this week. Frank Willey, a longtime Foley colleague, will become vice chairman.
While making sure that it preserves its network of traditional title offices, Foley said, the company is planning to expand its presence on the Internet.
Over the next two months, Fidelity plans to unveil the Web site that will sell real estate information, such as property descriptions, sale prices, mortgage amounts and tax liens.
Fidelity joins a handful of other Web sites with similar products, including rival First American, which launched a site with Orange-based Experian Inc.
Foley also plans to step up the company’s effort to sell title insurance policies on the Web. Most large title companies currently offer online service, but fewer than 1% of all sales actually take place over the Internet.
To help boost that figure, Fidelity plans to enhance its online business with special features designed to attract real estate agents and consumers, such as offering home buyers the ability to view and track title insurance policies and other home-buying paperwork via the Web, Foley said.
