AOL, Homestore.com Strike $200 Million Alliance

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 investigation centers on Homestore.com’s tight grip on
the majority of the nation’s residential real estate listings, which it
gained through deals with local realty boards and individual brokers.


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 agreement calls for Homestore.com to become the exclusive provider of
home and moving services on AOL, AOL.com, CompuServe, Netscape Netcenter and Digital City.


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.

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