Realogy acquires ZipRealty for $166M
Real estate data marketplace gets more crowded, rowdier
With this transaction, Realogy is acquiring ZipRealty's residential brokerage operations with 23 offices across the United States and its integrated real estate technology platform, including its recently released private-label solution for brokers.
"The acquisition of ZipRealty represents a strategic investment in the growth of our business and a compelling opportunity to further enhance shareholder value," said Richard A. Smith, Realogy's chairman, chief executive officer and president. "This transaction has two uniquely attractive facets for Realogy. First, we are acquiring an established, highly productive, technology-based national residential brokerage operation. Second, we will capitalize on the innovative technology platform that ZipRealty has honed over more than a decade of development.
“ZipRealty's technology provides a seamless digital experience for consumers, brokers and sales associates across the entire real estate transaction life cycle. We intend to fully leverage ZipRealty's comprehensive suite of world-class technology tools across our business, enabling both our franchise brands and our company-owned operations to be more productive, efficient and better serve their customers," he said.
ZipRealty's Board of Directors has unanimously approved and will recommend the transaction to the company's shareholders.
The transaction will be effected through a tender offer by Realogy and is expected to close in the third quarter of 2014, subject to the satisfaction of customary closing conditions, including regulatory clearance.
Realogy's franchise brands have approximately 247,000 brokers and affiliated sales associates operating in 13,600 offices worldwide under such well-known brand names as Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, Coldwell Banker Commercial, The Corcoran Group, ERA and Sotheby's International Realty.
Realogy's real estate brokerage subsidiary and largest franchisee, NRT, operates 710 U.S. offices with approximately 42,600 independent sales associates.
ZipRealty's owned and operated brokerage operations, with 1,800 independent sales associates and 23 offices, were responsible for $2.7 billion in closed sales volume, and represented the majority of ZipRealty's $76 million of revenue and $32 million of gross profit for the year ended December 31, 2013. With anticipated transaction synergies and growth, the EBITDA contribution of ZipRealty's owned operations is expected to be approximately $20 million annually within the next three years.
Realogy expects to welcome 17 of ZipRealty's residential real estate brokerage offices into existing offices operated by NRT. Realogy intends to continue to operate the remaining six ZipRealty offices on a stand-alone basis. Post-acquisition, NRT will have approximately 44,400 independent sales associates.
"ZipRealty's end-to-end and multi-device software platform and advanced product development capabilities will further accelerate our efforts to drive web- and mobile-based lead generation and client conversion," Smith said. "This will also serve to augment the investments we are already making to improve the experience of buying and selling a home for consumers, sales associates and brokers.
"We expect the acquisition of ZipRealty to drive incremental revenue for our company-owned, franchise and title business segments," said Anthony E. Hull, Realogy's executive vice president, chief financial officer and treasurer. "We are acquiring a residential brokerage operation that, after operating efficiencies, we anticipate will contribute meaningful earnings at an attractive valuation. We also expect that the upfront and ongoing costs associated with the enhanced technology made available to our franchisees will generate attractive returns. While deleveraging our balance sheet remains a very high priority, this unique transaction represents our opportunistic approach toward enhancing shareholder value through accelerated long-term growth."
"Integrating ZipRealty's time-tested systems and product offerings with Realogy's brokerage and franchising operations that reach approximately 170,000 U.S.-based sales associates provides a significant opportunity for future growth and product innovation," said Lanny Baker, president and chief executive officer of ZipRealty. "Our owned and operated sales associate base will become part of one of the most successful real estate brokerage firms in the nation and will benefit from Realogy's brand visibility and local presence. This transaction also represents a compelling outcome for ZipRealty's shareholders, highlighting the strategic value of ZipRealty's technology-powered capabilities."
After the transaction closes, Baker will continue in an executive leadership role within Realogy as chief executive officer of ZipRealty, reporting to Alex Perriello, president and chief executive officer of the Realogy Franchise Group.
Realogy intends to maintain ZipRealty's existing headquarters in Emeryville, California.