Embattled online real estate play Homestore found a
little silver lining in one of its clouds when a federal judge in Connecticut
ruled that the company’s planned sale of ConsumerInfo.com, an online consumer
credit unit, can go through.
Westlake Village, Calif.-based Homestore, plagued by accounting scandals, said
earlier this month that it would sell its ConsumerInfo.com unit to
U.K.-based business software company Experian for $130 million in cash.
Homestore bought ConsumerInfo.com from iPlace in in August 2001. The problem
with the sale to Experian was a little request for a restraining order and
injunction to halt the sale. The court action came from Stamford, Conn.-based
membership services company MemberWorks Inc. , which had
been the majority owner of iPlace.
MemberWorks said that a substantial portion of the purchase price from
Homestore was paid in the form of Homestore common stock, valued in the
merger agreement at approximately $22 per share, or a total of $36 million.
Homestore is now trading at about $2.
In its suit, MemberWorks accused Homestore of securities fraud, common law
fraud, negligent misrepresentation, unjust enrichment, and breach of
contract.
In denying MemberWorks’ request for an injunction against consummation of the
transaction, Judge Janet Arterton ordered that $58 million of the $130
million of proceeds from the sale of ConsumerInfo.com should be placed in a
trust.
Arterton also ordered the case transferred from Connecticut to the Central
District of California where class action suits for security claims against Homestore are pending.
“We are pleased that the judge has allowed the sale of ConsumerInfo.com to
proceed as planned,” said Mike Long, Homestore’s CEO.
Homestore said at the time the ConsumerInfo.com sale was announced that the
deal “divests Homestore of a business that is not central to our real estate
focus and allows us to redeploy substantial resources to our primary business
objective — making real estate professionals more productive and
profitable.”
Earlier this month Homestore completed its internal accounting inquiry for the year 2000 and found
that $36.4 million in ad revenue had been improperly recorded as independent
cash transactions. The initial
bad news last January involved restatement of earnings only for 2001.
Homestore Gets a Little Break
