News Corp.'s Move To Acquire Opcity For Real Estate Lead Gen - News Corporation (NASDAQ:NWS)

Quick Take

News Corp () has announced that its Move subsidiary has agreed to acquire Opcity for $210 million.

Opcity operates a high quality residential real-estate lead referral platform.

NWS is acquiring Opcity to broaden its Move subsidiary’s offerings with Opcity’s concierge-based, transaction-ready leads.

Target Company

Austin, Texas-based Opcity was founded in 2015 to connect real estate agents and mortgage loan officers to pre-screened, live leads.

Management is headed by Founder and CEO Ben Rubenstein, who has previously Co-Founded Yodle and served as its Vice President of Sales Operations.

Below is an overview video of the company’s services, presented by Opcity’s CEO and CFO:

(Source: Audin Chamber of Commerce)

Opcity’s primary offerings include:

• Opcity Referrals
• Broker Lead Accelerator

Investors invested at least $27 million in the company and include LiveOak Venture Partners, Georgian Partners, Icon Ventures and 8VC. (Source: CrunchBase, Opcity)

Market & Competition

According to a market research report by Statista, the digital lead generation advertising spending in the U.S. is projected to grow from $1.7 billion in 2015 to $2.1 billion by 2020.

This represents a moderate CAGR of 4.2% between 2015 and 2020.

Major competitive vendors that provide digital lead services include:

• ReferralExchange
• AgentTapp
• Agentology
• Qualia

Acquisition Terms and Rationale

NWS disclosed the acquisition price as $210 million or terms and but didn’t file an 8-K or disclose a change in financial guidance.

A review of the firm’s most recent 10-K filing as of June 30, 2018, indicated that the company had cash and equivalents of $2 billion and total borrowings of $1.95 billion.

Free cash flow during the 12 months ended June 30, 2018, was $393 million.

News Corp. aims to acquire Opcity for its Move subsidiary which operates Realtor.com.

The deal promises to widen Realtor.com’s lead generation offerings to agents from its traditional lead gen product to Opcity’s concierge-based model that provides ‘transaction-ready’ leads, likely at a higher price.

As Robert Thomson, News Corp CEO stated in the deal announcement,

Through product innovation and powerful media platforms, News Corp is increasing its presence and capabilities in the burgeoning digital real estate services market. We are absolutely focused on providing high quality services to real estate professionals and to consumers seeking to make an investment that is profoundly important to every family.

Speaking more specifically about the deal, Move CEO Ryan O’Hara said,

Consumers and agents use for one primary purpose – to buy or sell a home. This acquisition will help us bring buyers, sellers and agents together with as much simplicity, efficiency and choice as possible. The addition of Opcity to our portfolio will align with our strategy to enhance the experience of consumers, while providing our industry partners with more opportunities to connect with clients and grow their businesses.

In the past 12 months, NWS’ stock price has risen and dropped back to its original level vs. the S&P 500 Index gain of 13%, as the chart below indicates:

(Source: SEEKING ALPHA)

So, with the Opcity buy, News Corp is expanding its capital allocation to focus more on its ancillary businesses such as Move.

Furthermore, News Corp owns a majority stake in REA Group which operates the leading Australian residential property online site. NWS will no doubt apply Opcity’s approach to REA as well to gain as many synergies as possible.

NWS said that digital real estate services have become ‘the fastest growing segment’ of its operations. In that light, the deal to bolster its offerings across its digital real estate holdings makes excellent strategic sense.

Thank you for reading. I write about IPOs, M&A deals and public company investments in tech startups. I focus most of my time on IPOs. If you’re interested in investing smarter in IPOs, check out IPO Edge with a free trial.

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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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