Zillow Inc., the popular online real estate portal, announced Monday, June 28, that it will be acquiring rival firm Trulia Inc. in a $3.5 billion all-stock deal.
According to the companies' joint statement, Trulia's shareholders will receive 0.444 shares of Zillow for each share and will get to own a third of the new combined company. The new company will maintain both Zillow and Trulia as separate brands.
Zillow's CEO, Spencer Rascoff will head the new company and Trulia CEO Pete Flint will report to Rascoff. Flint and another unannounced member of Trulia's top management will join the Board of Directors of the new company.
Great Expectations
Through the acquisition, the companies hope to cater to their customers more effectively. In a summary of "expected benefits" of the transaction, the companies said that the deal will help:
- Fast innovation
- Greater access to a large amount of real estate data
- Better value and return on investments for advertisers
- Corporate cost saving
- Broader reach over MLS
"Consumers love using Zillow and Trulia to find vital information about homes and connect with the best local real estate professionals," Zillow CEO Rascoff said in the 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 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," he added.
Trulia CEO Flint also added that both Zillow and Trulia share the same goals and missions of "empowering consumers" and helping "real estate agents, brokerages and franchisors benefit from technological innovation", simultaneously.
"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," Flint said.
Lion's Market Share
News of the deal comes just days after the companies announced that they were in talks of a possible merger. The deal combines two online real estate portal magnates giving them the lion's share of market segment.
"There's no way that anyone can compete...because of how far ahead they are," Abe Garver, managing director of BG Strategic Advisors told MarketWatch.
Drawbacks
The Wall Street Journal notes that the deal wouldn't really benefit the two companies because listings are owned by realtors, who provide it to listing platforms. The deal only gives the agents more negotiating power.
Citing real estate experts, a feature on TIME magazine also notes the deal's looholes asserting that it is just a "pure-and-simple market share grab, not a quest for more or better data."
What's in it for me?
How will the deal affect the average home hunter?
"Portals like Zillow and Trulia have created a whole new additional category of real estate lifestyle surfing for consumers who are interested in home prices and community information, even though they may not be in the market to buy or sell a home in the immediate future," Stefan Swanepoel, a consultant and author on real estate trends, explained in a comment to Bloomberg.
