CoStar Group, Inc. (CSGP), a leading provider of commercial real estate information, analytics and marketing services, announced a definitive agreement to acquire Apartments.com, a division of Classified Ventures, LLC, for $585 million in cash.
Gannett Co., Inc. and Tribune Co., major stakeholders in Classified Ventures, expect to receive a gross distribution north of $155 million each from the sale. The transaction received unanimous approval from the board of directors of both CoStar and Classified Ventures, and is expected to conclude in the second quarter of 2014, subject to regulatory approvals.
The Acquiree
Apartments.com provides a national online resource that matches apartment seekers with varied choices. It has emerged as a leading advertising destination for professional management companies and building owners. The sale includes websites of Apartments.com, RentalHomesPlus.com and ApartmentHomeLiving.com, which generated 114 million visits on an aggregate with an average of 7 million unique monthly visitors in 2013.
Apartments.com has revolutionized the marketing avenues of commercial real estate’s apartment buildings, affording efficient, targeted advertising solutions that attract high-quality business.
The Deal
Along with the cash on hand, CoStar will take on considerable debt to fund the deal — consisting of a $400 million fully committed term loan and $225 million revolving credit facility from a consortium of leading banks. These include JPMorgan Chase Bank NA, the investment banking division of JPMorgan Chase & Co. (JPM), Bank of America Merrill Lynch, the investment banking divison of Bank of America Corp. (BAC), and Wells Fargo Bank National Association, a segment of Wells Fargo & Co. (WFC). These loans will also refinance the company’s existing debt and meet its ongoing working capital requirements.
The transaction will reportedly create an online behemoth in commercial real estate, by integrating CoStar’s leading information solutions with the comprehensive operations of Apartments.com, creating leading information, marketing and analytics company in commercial real estate.
Synergies
CoStar expects annual synergies of approximately $20 million, resulting from cross-selling and cost efficiencies over the couple of years following the close of the transaction.
Apartments.com will attract valuable, focused consumer traffic with the aid of CoStar's comprehensive database covering rents, availabilities, key contacts, comparable sales, photographs, building characteristics and other facts on hundreds of thousands of apartment buildings in the U.S.
The existing clientele of Apartments.com will also benefit from CoStar's diverse information and analytics solutions. In addition, the experienced, robust sales force of Apartments.com lends a deep advertising knowledge base to this Zacks Rank #3 (Hold) stock to further accelerate revenue growth in other segments.
CoStar is expecting to cross-pollinate its multifamily property database with more than 100 million visitors that showed interest in Apartments.com and its two sister sites, ApartmentHomeLiving.com and RentalHomesPlus.com, last year. The deal follows CoStar’s 2012 acquisition of LoopNet, valued at $860 million, the commercial real estate industry’s most heavily-trafficked site.
Going Forward
Founded in 1987, CoStar now has more than 8 million unique monthly visitors online and more than 2,000 staff in the United States, United Kingdom and France. This horizontal integration has established CoStar as a repository of commercial real estate information.
CoStar's existing marketplaces are pre-eminent in their respective verticals. Its commercial property sites, namely, LoopNet, CityFeet and Showcase attract over 5 million monthly unique visitors. Its rural land and farm properties’ sites include LandsofAmerica and LandAndFarm, which attract 1.7 million unique monthly visitors; and BizBuySell and BizQuest that claim over 1 million unique monthly visitors in total. Adding Apartment.com to its portfolio will designate CoStar as a comprehensive commercial real estate solutions company.
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