RealTime IT News

Homestore.com Is Where the Heart Is

With the blessing of the Justice Department and smiles from analysts, Homestore.com completed its acquisition of Cendant Corp.'s Move.com operation in a stock deal valued at approximately $790 million.

Goldman, Sachs analysts were bullish on the deal, saying that "we expect the company's revenues to grow to $472.2 million by 2002."

Cendant said it expects to record a pre-tax gain in excess of $525 million on the sale.

Westlake Village, CA-based Homestore.com closed at $34 today, down $2.62.

Homestore.com said it will integrate key Cendant assets from the acquisition into its family of sites, including Move.com, Rent Net, House Net, Senior Housing Net, and Self Storage Net, as well as direct marketing company Welcome Wagon.

The deal assures that Homestore's REALTOR.com site will have exclusive access to the online listings of Cendant's Century 21, Coldwell Banker and ERA national real estate franchises for 40 years.

In a separate transaction, the Real Estate Technology Trust agreed to purchase certain Homestore.com professional subscription products for its agents and brokers in the same real estate franchise networks, thereby more than doubling Homestore.com's current subscriber base.

Homestore.com said that it expects pro forma 2001 revenues of $443 million and earings of 44 cents per share. For 2002, it expects revenues of about $600 million and EPS of 84 cents.

The company said it is expecting to record a one-time acquisition-related charge in the first quarter between $10 and $15 million, primarily related to stay bonuses, severance, and facilities and systems integration costs.

The acquisition of the Move.com Internet real estate portal creates such a large online presence that the Justice Department had said it would conduct an antitrust review before the closing. Homestore did say that the Justice Department has notified the company that it is continuing an investigation of certain agreements the company has with Cendant.

As a result of the transaction, Cendant owns approximately 21.5 million shares of Homestore.com common stock, representing approximately a 19 percent stake. Richard A. Smith, chairman and CEO of Cendant's real estate division, is expected to be elected to Homestore.com's board of directors

Homestore.com is a provider of online media and technology solutions to the home and real estate industries, serving both consumers and professionals. At the time the deal was announced, Homestore, which also operates REALTOR.com, HomeBuilder.com, SpringStreet.com and HomeFair.com, said the acquisition would create "the largest ... marketplace for home and real estate-related products and services on the Internet."

Goldman, Sachs, which rates Homestore as a "market outperformer," said in an advisory to clients that "we would note that its recurring subscription revenue provide Homestore with a high degree of visibility compared to other online companies."

"Given the inherent operating leverage in the company's business, we expect gross margins will continue to improve from 73 percent in 4Q00 to 75 percent for 2002," GS said. "The company reached cash profitability in 3Q00 and operating profitability in 4Q00, ending the year with approximately $345 million in cash on its balance sheet."