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Real Estate Giant Realogy to Acquire ZipRealty for $166 Million

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Strategic Addition of Brokerage Operations and Innovative Technology Platform Expected to Drive Incremental Revenue for Company-Owned, Franchise and Title Business Segments

Realogy Holdings Corp. (NYSE: RLGY) has once again reinforced its leadership position by acquiring one of the most successful, technology-based real estate brokerage firms, ZipRealty, Inc. (NASDAQ: ZIPR).

The announcement today states that Realogy has entered into a definitive agreement to acquire ZipRealty for $6.75 per share in an all-cash transaction valued at approximately $166 million.

With this transaction, Realogy is acquiring ZipRealty’s residential brokerage operations with 23 offices across the United States and its leading-edge, integrated real estate technology platform, including its recently released private-label solution for brokers.

“The acquisition of ZipRealty represents a strategic investment in the growth of our business and a compelling opportunity to further enhance shareholder value,” said Richard A. Smith, Realogy’s chairman, chief executive officer and president. “This transaction has two uniquely attractive facets for Realogy. First, we are acquiring an established, highly productive, technology-based national residential brokerage operation. Second, we will capitalize on the innovative technology platform that ZipRealty has honed over more than a decade of development. ZipRealty’s technology provides a seamless digital experience for consumers, brokers and sales associates across the entire real estate transaction life cycle. We intend to fully leverage ZipRealty’s comprehensive suite of world-class technology tools across our business, enabling both our franchise brands and our company-owned operations to be more productive, efficient and better serve their customers.”

ZipRealty’s Board of Directors has unanimously approved and will recommend the transaction to the company’s shareholders. The transaction will be effected through a tender offer by Realogy and is expected to close in the third quarter of 2014, subject to the satisfaction of customary closing conditions, including regulatory clearance.

Realogy’s franchise brands have approximately 247,000 brokers and affiliated sales associates operating in 13,600 offices worldwide under such well-known brand names as Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, The Corcoran Group®, ERA® and Sotheby’s International Realty®. Realogy’s real estate brokerage subsidiary and largest franchisee, NRT, operates 710 U.S. offices with approximately 42,600 independent sales associates. ZipRealty is a national real estate brokerage that leverages leading-edge technology, comprehensive online marketing and an intelligent customer relationship management (CRM) platform to attract and serve customers and to support increased productivity for its affiliated sales associates.

ZipRealty’s profitable owned and operated brokerage operations, with 1,800 independent sales associates and 23 offices, were responsible for $2.7 billion in closed sales volume, and represented the majority of ZipRealty’s $76 million of revenue and $32 million of gross profit for the year ended December 31, 2013.  With anticipated transaction synergies and growth, the EBITDA contribution of ZipRealty’s owned operations is expected to be approximately $20 million annually within the next three years.

Realogy expects to welcome 17 of ZipRealty’s residential real estate brokerage offices into existing offices operated by NRT. Realogy intends to continue to operate the remaining six ZipRealty offices on a stand-alone basis. Post-acquisition, NRT will have approximately 44,400 independent sales associates.

Smith continued: “ZipRealty’s end-to-end and multi-device software platform and advanced product development capabilities will further accelerate our efforts to drive web- and mobile-based lead generation and client conversion. This will also serve to augment the investments we are already making to improve the experience of buying and selling a home for consumers, sales associates and brokers.

“ZipRealty has invested in both the technical talent and the brokerage expertise necessary to build an impressive array of custom-designed technology and online marketing tools that generate incremental business for sales associates and brokers. These assets and capabilities will provide us with a powerful new slate of product offerings for our franchisees and company-owned operations. With ZipRealty’s recently released private-label software-as-a-service product built upon its proven, fully-integrated digital platform, we expect the technology to substantially enhance the value proposition of our franchise brands and increase the productivity of our franchisees. We are very excited about the prospects for future growth, and we compliment the ZipRealty product and marketing teams for the development of an outstanding portfolio of market-ready technology that positions brokers to better serve their sales associates and their customers.”

“We expect the acquisition of ZipRealty to drive incremental revenue for our company-owned, franchise and title business segments,” said Anthony E. Hull, Realogy’s executive vice president, chief financial officer and treasurer. “We are acquiring a residential brokerage operation that, after operating efficiencies, we anticipate will contribute meaningful earnings at an attractive valuation. We also expect that the upfront and ongoing costs associated with the enhanced technology made available to our franchisees will generate attractive returns. While deleveraging our balance sheet remains a very high priority, this unique transaction represents our opportunistic approach toward enhancing shareholder value through accelerated long-term growth.”

“Integrating ZipRealty’s time-tested systems and product offerings with Realogy’s brokerage and franchising operations that reach approximately 170,000 U.S.-based sales associates provides a significant opportunity for future growth and product innovation,” said Lanny Baker, president and chief executive officer of ZipRealty. “Our owned and operated sales associate base will become part of one of the most successful real estate brokerage firms in the nation and will benefit from Realogy’s brand visibility and local presence. This transaction also represents a compelling outcome for ZipRealty’s shareholders, highlighting the strategic value of ZipRealty’s technology-powered capabilities.”

After the transaction closes, Baker will continue in an executive leadership role within Realogy as chief executive officer of ZipRealty, reporting to Alex Perriello, president and chief executive officer of the Realogy Franchise Group.

Realogy intends to maintain ZipRealty’s existing headquarters in Emeryville, California, using its agile product development capabilities, its “innovation factory” methodology, and Realogy’s industry presence to advance the ZipRealty technology platform and deliver new applications across Realogy’s business segments.

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