Zillow to buy Trulia for $3.5 billion [Chicago Tribune :: ]
(Chicago Tribune (IL) Via Acquire Media NewsEdge) July 28--Zillow Inc. announced plans Monday morning to acquire Trulia Inc. in a $3.5 billion stock deal that will combine the forces of two behemoths in the online home purchase and rental search business.
The two online real estate advertising companies, had a combined 85,000-million-plus unique users across their web and mobile platforms last month, will continue to operate as separate brands after the deal closes next year but will work together to develop new mobile and web products for consumers and court real estate agents to advertise on the sites, executives said Monday. Rumors of the combination leaked late last week.
Zillow CEO Spencer Rascoff said the goal is to capture more of an incredibly fragmented real estate advertising marketplace. Real estate agents spent an estimated $12 billion annually on marketing to consumers each year and combined, revenues of the two companies account for only 4 percent of that. The rest of it goes to newspaper advertising and search engine marketing, among other things.
"We can innovate faster," Rascoff told analysts on a call this morning detailing the acquisition. "Mobile is rapidly becoming the media of choice for online home shopping."
"Real estate agents who use technology are better agents and better agents are better advisers," he added. "That philosophy is not going to change. We both believe technologically enabled agents are the future."
The acquisition announcement comes as another report shows a home purchase market whose recovery is having trouble maintaining its pace. The National Association of Realtors reported Monday that pending home sales fell 1.1 percent in June, the first decline in four months.
Seattle-based Zillow, founded in 2005, focuses on home listings for buyers as well as a wealth of free information for homeowners to keep tabs on their own home values and those of their neighborhood. It also operates a mortgage marketplace, HotPads and Postlets.
San Francisco-based Trulia, which also launched in 2005, concentrates more on property listings but the cross-selling opportunities should boost its position in mortgages and rentals, said Trulia CEO Pete Flint, who will remain in that position after the deal closes, reporting to Rascoff.
"We're both very excited about the rentals opportunity," Rascoff added. "Each of us independently have very large rental audiences and we're both in the early stages of monetizing those rental audiences."
The combined entity also will seek to negotiate more licensing deals to receive property listing information directly from local multiple listing services., something neither company has in the Chicago area.
While discussions between Midwest Real Estate Data LLC, the MLS for the Chicago area, and Zillow have taken place, no licensing agreement was ever reached so local listings are not fed directly to Zillow's site. MRED only sends listings to Trulia if a local real estate brokerage asks them to, according to Jeff Lasky, a spokesman for MRED.
Zillow does get Chicago-area listings from other companies that brokerages give their listings to, like ListHub.
In fact, Zillow's site this morning listed 24,400 homes for sale in Chicago, compared to 23,786 on Trulia.com.
According to comScore Inc., Zillow's network counted 53,806 unique visitors in June, up 27 percent from a year ago. Trulia's visitor count was 31,624, up 20 percent from June 2013.
Under the transaction, which is expected to close in 2015, shareholders of Trulia will receive 0.444 of Zillow's Class A common stock for each share of Trulia owned. At closing, Trulia shareholders will own 33 percent of the combined company with Zillow shareholders owning the remaining two-thirds of the entity.
By combining functions, the combined company expects to see cost savings of $100 million in 2016.
Shares of Zillow were trading at around $151 at mid-morning, down almost 5 percent. Shares of Trulia were up more than 10 percent, to just over $62 a share.
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