REA Group shares have jumped more than 4 per cent to $52.20 in morning trade after the online property giant announced the $25 million purchase of Flatmates.com.au.
Established in 1990, Flatmates.com.au is Australia’s biggest share accommodation website reportedly receiving an average of 2.6 million visits and 9 million flatmate searches monthly.
REA Group says the strategic acquisition will provide an opportunity for international expansion.
The purchase is to be funded from cash reserves plus potential earn out payments over the next two years, which are dependent on the financial performance of Flatmates.
Completion is expected in the coming weeks once certain conditions precedent are satisfied.
REA Group CEO Tracey Fellows says there is enormous growth in the sharing economy.
"The share accommodation segment is one of the fastest growing segments in the Australian property market with traffic across the sector growing at over 50 per cent year-on-year," Fellows says.
“This acquisition allows us to play a more active role in helping consumers, regardless of what phase of the property lifecycle they are in, to find a home.
Growth in the segment includes renters looking for flatmates, homeowners seeking to rent out a spare room, property investors hoping to maximise on their outlay; it includes people at almost every phase in the property cycle.
Fellows says the move is consistent with REA Group's purpose of making property simple and stress free.
"Flatmates is the number one player in share accommodation by both revenue and audience, REA Group is uniquely placed to accelerate that leadership position through the sharing of technology, expertise and reach.”
Flatmates co-founders Thomas Clement and Andrew Maloney add the company's acquisition by REA is an exciting and natural progression for Flatmates.
"Integration with traditional property sectors will not only enable us to provide an enhanced experience to our current audience but also to renters, homeowners and property investors,” Clement says.
He will continue in his role as CEO of Flatmates following the transaction.
No details are provided as to the earning power of flatmates.com.au, which is likely to be relatively immaterial compared to the $185.9 million in EBITDA REA Group posted for the six months ending December 31 2015.
REA Group is still majority owned by News Corp, which is using the REA Group vehicle to capitalise on the transition of advertising revenue online and away from old world media platforms.