The U.S. real estate giant CoStar is set to buy out the British number three real estate portal OnTheMarket for approximately £100 million.
CoStar's bid of 110p per share represents a premium of 56% to OnTheMarket’s last closing price and 93% to the three-month volume-weighted average price. The acquisition is expected to close in the fourth quarter of 2023 pending shareholder approval with OnTheMarket's Board having already expressed unanimous support.
Rumours of the takeover began to circulate in British media outlets late yesterday and were confirmed this morning via press releases issued by the two companies. The news follows CoStar founder and CEO, Andy Florance's candid admission at the recent Property Portal Watch conference that his company was coming to Europe with a $9 billion M&A "war chest".
Speaking of the acquisition, Florance said:
“We believe the acquisition of OnTheMarket represents an attractive and efficient entry point into the £8 trillion United Kingdom residential property market. We are excited to welcome the OnTheMarket team to the CoStar Group family.”
“OnTheMarket’s network of property professionals and breadth of advertiser relationships provide a strong foundation to compete with the dominant United Kingdom property portals,” continued Florance.
“The combination of OnTheMarket’s large network of agents and access to listings, together with the marketplace experience and resources of CoStar Group, has the potential to create the leading agent-friendly player in the UK residential marketplace. We see OnTheMarket as an important step in expanding our Homes.com residential network not only in the UK, but across Europe. We believe the market opportunity in Europe is over $10 billion, and we intend to participate aggressively in developing and expanding our residential marketplace network.”
As Florance highlighted in an on-stage interview with Online Marketplaces Chairman Simon Baker recently, CoStar has a track record of taking minor players and spending its way to market leadership. The company took Apartments.com from a minor player in the U.S. rentals market to an undisputed market leader and is in the process of turning Homes.com into a viable challenger to Zillow in the residential sales market.
The S&P 500 company has a phenomenal record of growth and clearly sees European expansion as part of its next phase.
A press release said that as the owner of OnTheMarket, CoStar would commit to spending £46.5 million on sales and marketing in the first full year "as the first stage of a multi-year investment programme totalling hundreds of millions of pounds". The intent to take on Rightmove was left in no doubt with the press release name-checking the dominant British portal saying that the figure was three times the current annual marketing spend of OnTheMarket's big green rival.
OnTheMarket's CEO, Jason Tebb referenced the increased budget set to be at his disposal in his comments:
“From a position of strength, partnering with CoStar Group will significantly accelerate our strategy with the clear target of becoming the market leader, whilst staying committed to fair and sustainable pricing. CoStar Group will bring industry-leading global expertise and significant financial firepower to invest in OnTheMarket, allowing us to accelerate our transformation of the sector. We have strong shared values in our commitment to agents who we believe will benefit from unparalleled value and greater opportunities to enhance their businesses.”
The takeover looks set to revive OnTheMarket after a slightly rocky period. Founded by agents in 2013, OnTheMarket failed to live up to expectations largely thanks to the controversial 'one other portal rule' and some questionable PR from its management. The portal looked to have found the right path under former agent Tebb's leadership which began in late 2020.
The majority agent-owned enterprise made a small net profit in 2020 and has been close to breaking even since then. However, despite increasing revenue and ARPA the company's latest missive to the market in July had some industry commentators worried about the falling number of agents listing on OnTheMarket.