Investment activist Brett Stone has told OTM member estate agents that ‘no deal is better than a bad deal’ when it comes to CoStar UK’s planned acquisition of OnTheMarket and is asking agents to help him block the bid going forward.
In an open letter published today, Stone argues that Washington D.C. based CoStar Group’s proposed acquisition of OnTheMarket significantly undervalues the business and is not in the United Kingdom’s national interest.
And if the CoStar transaction is approved by shareholders, he says, it is likely to result in ‘significantly higher’ total portal costs for UK estate agents, more than 10,000 of which are small businesses.
“Ending estate agent’s ownership in the agents’ portal is not the right answer to solve OnTheMarket’s problems,” he says.
Stone goes on to say that he hopes OnTheMarket’s chairman Christopher Bell will do the decent thing and resign, “allowing shareholders to appoint an honest competent director who understands digital markets, can protect your interests, and make sure OnTheMarket’s chief executive officer delivers for you, shareholders, consumers and other agents.”
Stone approached OnTheMarket with what he says was “an agent-friendly proposal” in October last year which included the portal receiving between £74 million and £108 million in cash subject to mutual due diligence and approval. It also contained a commitment to invest in product development to benefit agents and consumers as well as an “irrevocable and indefinite cap” on agents listing fees.
That offer was rebuffed and further letters to OnTheMarket in January and July this year where swept aside and then OnTheMarket’s board then entered into a confidentiality agreement with CoStar at the end of August.
Stone adds: “My interest is the long-term development of the UK property commerce category for the benefit of its stakeholders, not securities trading or speculation. Take action now before it is too late. Vote against CoStar.”
A spokesman for OnTheMarket tells The Neg: “OnTheMarket refutes both that the proposed deal undervalues OnTheMarket and that it is it is likely to result in significantly higher total portal costs for UK estate agents .
“As previously stated, partnering with CoStar will significantly accelerate our strategy with the clear target of delivering what agents want – the ability to have a real choice on which portal to list with. Furthermore, CoStar has committed to fair and sustainable pricing and intends to continue charging agents a small proportion of Rightmove’s current charges.
“CoStar 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.”
FAIR AND SUSTAINABLE PRICING
And pointing out that the offer price is at a 93.7% premium to the average market price in the three months prior to deal announcement CoStar itself reiterated what it said last month.
“Since its founding in 1987, CoStar has worked co-operatively with brokers and agents in all real estate sectors, with the name ‘CoStar’ purposefully chosen to emphasise its supporting role in agents’ real estate transactions.
“Throughout years of investment, CoStar has sought to support agents and their businesses and has never sought to disintermediate agents.
“Similar to OnTheMarket, CoStar believes in fair and sustainable pricing that reflects the value provided by its information and marketplace solutions. CoStar intends to continue charging agent clients a small proportion of Rightmove’s current charges.”