Real estate portal Zillow Inc. will acquire its largest rival, Trulia Inc., for $3.5 billion in stock, the firms announced this morning. The deal is expected to close in 2015. Combined, the two companies and their partner networks account for more than 75 percent of all real estate-related Internet traffic.
The combined company will maintain both the Zillow and Trulia consumer brands, they said in a statement. Pete Flint will remain CEO of Trulia, reporting to Zillow CEO Spencer Rascoff. He will join the board of directors of the combined company, along with a yet-to-be-announced second Trulia board member.
"Consumers love using Zillow and Trulia to find vital information about homes and connect with the best local real estate professionals," Rascoff said in a statement. "Both companies have been enormously successful in creating compelling consumer brands and deep industry partnerships, but it’s still early days in the world of real estate advertising on mobile and [the] web. This is a tremendous opportunity to combine our resources."
The firms asserted that despite their current high valuation, significant opportunities of scale remain in the real estate advertising sector, as the majority of advertising dollars in the real estate industry have yet to migrate online or to mobile. The two companies’ combined revenue currently represents less than 4 percent of the estimated $12 billion real estate professionals spend on marketing their services to consumers each year, the firms said in a statement.
In June, Zillow reported a record 83 million unique users across mobile and web. For the same month, Trulia reported a record 54 million monthly unique users across its sites and mobile apps. The companies also revealed approximately half of Trulia.com’s monthly visitors do not visit Zillow.com, and approximately two-thirds of Zillow.com’s monthly visitors across all devices do not use Trulia.com. That’s why they plan to maintain both sites as distinct brands.
Explaining the rationale for the merger, the firms claim the deal will allow them to develop new applications and software for the web and mobile more quickly, allow them to provide greater free access to real estate data for consumers and industry professionals, seamlessly integrate listing distribution across the sites, and enhance their value for advertisers. The merged company will also cut costs in-house, claiming the deal will enable them to trim $100 million in overhead from their bottom line.
As part of the agreement, Trulia shareholders will receive 0.444 shares of Class A Common Stock of Zillow Inc. for each share of Trulia, and will own approximately 33 percent of the combined company at closing. Current Zillow holders of Class A Common Stock and Class B Common Stock will receive one comparable share of the combined company at closing, and will represent approximately 67 percent of the combined company. The transaction assumes Trulia’s convertible notes will be assumed by the combined company at closing. The value of the deal represents a premium of 25 percent to Trulia’s closing price on July 25.
Goldman, Sachs & Co. advised Zillow, while J.P. Morgan Securities LLC and Qatalyst Partners LP advised Trulia.
