Zillow is paying $3.5 billion to acquire Trulia, a whopping deal that will bring together the two long-time rivals and create a powerhouse in the online real estate industry. The companies announced the deal — first reported by Bloomberg News last week and the biggest acquisition in Zillow’s 9-year history — this morning.
“We obviously have competed in the marketplace for many years, and I think we have just had tremendous respect for the team at Zillow,” said Trulia CEO Pete Flint in a conference call with analysts. He also called the all-stock deal — a 25 percent premium over Trulia’s Friday stock close — “tremendous” for shareholders and employees.
In an interview with GeekWire, Zillow CEO Spencer Rascoff addressed the competition, calling it a “friendly rivalry” which “comes from a place of mutual respect for one another.” Pressed on that topic, Rascoff added that there is a shared mission by both companies to empower consumers and help real estate agents be more successful.
“It never has been personal,” said Rascoff of the rivalry. “It has always been business, I guess is the way I describe it. Maybe it is the Seattle Seahawks and the San Francisco 49ers. There is certainly a rivalry there, but it is not a hatred. We both are in this game, and we are both very successful, and we can compete on the field but still respect one another off the field.”
The deal came together in the past six weeks after Rascoff approached Trulia’s management team.
San Francisco-based Trulia employs about 1,100, including more than 400 in Bellevue through its acquisition of Market Leader last year. Seattle-based Zillow employs 1,000.
The company isn’t saying how many layoffs will occur as a result of the combination, and the deal still must go through a drawn-out regulatory process. Given that Trulia and Zillow only control four percent of real estate agent marketing spend on an annual basis, Rascoff said that he does not anticipate any regulatory roadblocks. “This category is huge, and incredibly fragmented,” he said.
Rascoff said the company will achieve $100 million in cost avoidances in 2016 through things such as consolidation of advertising spending and new employee hiring.
Flint will remain as CEO of Trulia, which will continue to operate as a standalone brand in the Zillow family. He will also join the board, along with another representative from Trulia. Trulia shareholders will own about one third of Zillow if the deal goes through.
Asked about the need to operate two separate real estate brands, Rascoff said that it is a common practice among online media companies.
“You can think of this as The Weather Company operates The Weather Underground, Weather.com and Intellicast, or IAC operates a family of brands in online dating: Match.com, Tinder and HowAboutWe,” said Rascoff. “The reason to have (different) brands is that certain brands appeal to certain consumers for different reasons, either for Web design or product focus.”
He added that it is “advantageous to have multiple brands.” Zillow attracted 83 million visitors last month, while Trulia attracted 54 million.
“I would suspect that the way the brands evolve is that Trulia is considered to be a home shopping and rental shopping search engine that is highly transactional for someone who is in the purchase process, whereas Zillow tends to be a little bit earlier stage in that purchase process and in that consumer funnel because we have information that is quite relevant to home owners because of the nature of the Zestimate and other data that we have on off-market homes,” said Rascoff, adding that it is not uncommon for brands to have some overlapping features.
Shares of Zillow are down 4.6 percent on the news, though the company is still valued at $6 billion. Trulia shares are up more than eight percent.
Previously on GeekWire: Why a Zillow acquisition of Trulia makes a ton of sense, and a few reasons why it doesn’t
Full press release here:
Zillow, Inc. (NASDAQ: Z) today announced that it has entered into a definitive agreement to acquire Trulia, Inc. (NYSE: TRLA) for $3.5 billion in a stock-for-stock transaction. The Boards of Directors of both companies have approved the transaction, which is expected to close in 2015.
The combined company will maintain both the Zillow and Trulia consumer brands, offering buyers, sellers, homeowners and renters access to vital information about homes and real estate for free, and providing advertising and software solutions that help real estate professionals grow their business. At closing, Trulia CEO Pete Flint will remain as CEO of Trulia reporting to Zillow CEO, Spencer Rascoff, and will join the Board of Directors of the combined company. In addition, at closing, a second member of Trulia’s Board of Directors will join the board of the combined company. Further operational and organizational details will be announced at closing.
“Consumers love using Zillow and Trulia to find vital information about homes and connect with the best local real estate professionals,” Rascoff said. “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 Web. This is a tremendous opportunity to combine our resources and achieve even more impressive innovation that will benefit consumers and the real estate industry.”
“Trulia and Zillow have a shared mission and vision of empowering consumers while helping real estate agents, brokerages and franchisors benefit from technological innovation,” said Flint. “By working together, we will be able to create even more value for home buyers, sellers, and renters, as well as create a robust marketing platform that will help our industry partners connect with potential clients and grow their businesses even more efficiently. Our two companies share complementary employee cultures with innovative, consumer-first philosophies and a deep commitment to create the best products and services for our industry partners.”
Both Zillow and Trulia are primarily media companies, generating the majority of revenue through advertising sales to real estate professionals. Despite continued growth as public companies, significant opportunities of scale remain as the majority of advertising dollars in the real estate sector have yet to migrate online or to mobile. For example, the two companies’ combined revenue currently represents less than 4 percent of the estimated $12 billion[i] real estate professionals spend on marketing their services to consumers each year.
Zillow and Trulia are two rapidly growing real estate sites on mobile and the Web, enabling advertisers to reach a large and expanding consumer base. In June, Zillow reported a record 83 million unique users across mobile and Web[ii]. For the same month, Trulia reported a record 54 million monthly unique users across its sites and mobile apps[iii]. The two brands have limited consumer overlap – 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[iv]. Maintaining the two distinct consumer brands will allow the combined company to continue to offer differentiated products and user experiences, attract more users and maximize the distribution of free content across multiple platforms, apps and channels.
A summary of expected benefits of the deal, include:
Faster Innovation. By combining resources, the companies expect to accelerate innovation on mobile and Web to provide more valuable tools and services to consumers and professionals.
Greater Access to Free Real Estate Market Data. The companies expect to share real estate market data, housing trend analysis, and forecasts to make more free data available to consumers and real estate professionals to empower people to make more informed decisions.
Broader Distribution. Home sellers and their agents, brokerages, and participating MLSs will benefit from seamless free distribution of listings across even more platforms to reach an even larger audience of consumers.
Enhanced Value and ROI for Advertisers. The companies expect to offer shared services and marketing platforms for advertisers that enhance agent productivity and marketing and deliver greater return on their investment.
Corporate Cost Savings. By operating independent consumer brands through one corporation, the companies expect to realize synergies to improve overall operational efficiency over the long-term. By 2016, management expects to achieve at least $100 million in annualized cost avoidances.
As part of the agreement, Trulia shareholders will receive 0.444 shares of Class A Common Stock of Zillow, Inc.[v] for each share of Trulia, and will own approximately 33% 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% 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% to Trulia’s closing price on July 25, 2014.
The agreement is subject to the satisfaction of customary closing conditions, including the expiration of U.S. antitrust waiting periods and shareholder approval of both companies. Zillow co-founders Rich Barton and Lloyd Frink, who control a majority of the shareholder voting power of Zillow, have agreed to vote in favor of the transaction. In addition, Trulia directors holding 7.4% of Trulia stock have entered into voting agreements with Zillow to vote in favor of the transaction.
Goldman, Sachs & Co. acted as the exclusive financial advisor, and Shearman & Sterling LLP and Perkins Coie LLP acted as legal counsel to Zillow. J.P. Morgan Securities LLC acted as a financial advisor, and Goodwin Procter LLP and Wilson Sonsini Goodrich & Rosati acted as legal counsel to Trulia. Qatalyst Partners LP also acted as a financial advisor to Trulia.
Conference Call to Discuss Acquisition at 9 a.m. EDT / 6 a.m. PDT
Zillow CEO Spencer Rascoff will host a conference call today with Trulia CEO Pete Flint at 9:00 a.m. EDT / 6:00 a.m. PDT. The live webcast of the conference call will be available on the investor relations section of Zillow, Inc.’s website at http://investors.zillow.com/, or on the investor relations section of Trulia, Inc’s website at http://ir.trulia.com/. For those without access to the Internet, the call may be accessed toll-free via phone at 877-643-7152 with conference ID# 80954780. Callers outside the United States may dial 443-863-7921 with conference ID# 80954780. Following completion of the call, a recorded replay of the webcast and a copy of the prepared remarks will be available on the investor relations section of Zillow, Inc.’s and Trulia.com’s websites for one year.
Company Conference Calls for Quarterly Earnings
The companies will host separate conference calls to discuss each company’s second quarter results. The calls will be held on the following dates:
Trulia: July 31, 2014, at 5 p.m. EDT / 2 p.m. PDT. The call details will be available announced separately, and will be available on Trulia’s investor relations website at ir.trulia.com.
Zillow: August 5, 2014 at 5 p.m. EDT / 2 p.m. PDT. The call details will be announced separately, and will available on Zillow’s investor relations website at investors.zillow.com.
And here’s a note that Trulia sent to customers:
As a valued Trulia customer, I wanted to reach out personally to let you know that we have just announced that Trulia has entered into a definitive agreement to be acquired by Zillow. You can read the details in the complete press release here: ir.trulia.com.
This will be a new and exciting chapter for all of us. The combination of the two companies sets the stage for us to accelerate innovation and to provide more valuable tools and services to consumers and professionals.
Trulia and Zillow will continue to operate as separate and distinct brands once the transaction closes. We will continue to offer buyers, sellers, homeowners and renters access to vital information about homes and real estate for free and provide advertising and software that help you grow your business.
As additional details about the acquisition become available, we will make sure to let you know. For now, it’s business as usual at Trulia. Our focus and commitment to connecting you with consumers and helping you close more transactions remains the top priority of our entire team.