AOL, Homestore.com Strike $200 Million Alliance
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In a broad deal that would distribute Homestore.com's residential relocation content and services across key America Online Inc. properties, the two companies on Monday forged an exclusive five-year alliance that the firms valued at more than $200 million.
The deal represents a serious commitment for Homestore.com (HOMS), which is hoping to carve out a leadership position in the competitive residential real estate market online. America Online (AOL) benefits by being able to give its customers access to the information, which it will highlight by creating a new home-related channel on the AOL service.
The agreement calls for Homestore.com to give AOL 3.9 million shares of its common stock, which must reach certain levels throughout the terms of the deal, or else HomeStore.com will have to cough up cash. To that end, HomeStore.com has issued a $90 million letter of credit, which won't be drawn upon unless the stock price fails to meet the targets. The company will also hand over $20 million, under the terms of the deal.
Homestore.com's stock price took a dive recently after the Justice Department began a probe into possible anti-competitive business practices at the company.
The Justice Department is apparently concerned that this exclusivity may harm sellers, since it prevents the wide dissemination of information about what homes are on the market.
The company will also exclusively provide apartment listings and other residential real estate listings across these AOL properties.
Homestore.com's content will also appear in other areas across the properties, including the home decorating, hardware, home finance, home office, and lawn and garden areas.
"Homestore.com is the leading company in the online home and real estate industry, and having easy access to its property listings, services and content will be a real benefit to our members and users of our Web-based brands," said Bob Pittman, president and chief operating officer of America Online.
This latest deal expands an existing three-year relationship between the two companies, under which Homestore.com provided AOL with content.