Zillow’s proposed $3.5 billion acquisition of rival Trulia is inching towards approval, and as a next step both companies have set special shareholder meetings to vote on the deal for Dec. 18.
A majority of shareholders at both companies must approve the deal, and if a shareholder fails to submit their proxy card it will be registered as a vote against the merger. The boards of both companies are recommending that shareholders approve the transaction.
If the deal is consummated, Zillow shareholders would own 67 percent of the newly-formed company, while Trulia shareholders would own 33 percent. The deal also must meet other regulatory approvals, with Zillow saying recently that it expects approval in the first quarter.
Zillow CEO Spencer Rascoff has argued that a combined Zillow and Trulia would control just four percent of the overall advertising spend in the real estate sector in the U.S. The combined company, to operate under the name Zillow and trade under the ticker “Z,” would have more than 2,100 employees, and combined monthly unique visitors of more than 130 million.
As part of the pending shareholder vote, Zillow today issued a 224-page definitive proxy statement which lays out details of the merger.
Shares of both Seattle-based Zillow and San Francisco-based Trulia have slumped since the acquisition was announced in late July. Zillow was trading at $158.86, while Trulia was at $56.35. As of Nov. 13, Zillow’s stock was at $102.46, while Trulia’s stock stood at $43.39. (Zillow an Trulia’s stock both have increased in price since the information supplied in the proxy, with Zillow now around $118 and Trulia trading at about $50.)
Certain Trulia execs are slated to secure a windfall if the deal is completed, receiving what is known as “double trigger equity acceleration.” Trulia CEO Pete Flint is slated to receive $13.4 million; CFO Prashant Aggarwal will receive $11 million; COO Paul Levine will receive $11.5 million; and former Market Leader CEO Ian Morris will receive $2 million.
The proxy statement also lays out the positive and negative aspects of the merger. Here’s what Zillow’s board said they considered:
The Zillow board considered the following positive factors, among others: (1) the fact that Trulia’s business and operations complement those of Zillow, (2) the fact that Trulia’s earnings, and the synergies potentially available in the mergers (which are expected to be at least $100 million in annualized cost savings by 2016), create the opportunity for the combined company, through Holdco, to have superior future earnings and prospects compared to Zillow’s future earnings and prospects on a stand-alone basis, (3) the expectation that the mergers would be accretive to non-GAAP earnings per share in the first full fiscal year following the closing, and (4) holders of Zillow Class A common stock will receive registered shares of Holdco Class A common stock pursuant to the Zillow merger, the potential that the value of Holdco common stock will increase after the completion of the mergers and that Zillow shareholders would share in any increase in that value. The Zillow board also considered the following factors and potential risks associated with the mergers, among others: (1) the difficulty inherent in integrating the business, assets and workforces of two large public companies and the risk that the cost savings, synergies and other benefits expected to be obtained in the transactions contemplated by the merger agreement might not be fully realized, (2) the possibility of significant costs and delays resulting from seeking regulatory approvals necessary to complete the transactions contemplated by the merger agreement, (3) the possibility that the mergers may not be completed if such approvals are not obtained, and (4) the potential negative impacts on Zillow, its business and its Class A common stock price if such approvals are not obtained.