Zoopla to buy price comparison site uSwitch

Zoopla, the house-hunting website, is on its own shopping trip, buying online price comparison service uSwitch for £160m, as it seeks to become a broader home services portal.

Combined with a 13 per cent increase in six-month revenue, the acquisition sent Zoopla's shares up as much as 16 per cent to 215p, amid hopes that the company was starting to reverse the decline it has suffered since the launch of a rival site at the start of this year.

Zoopla, which reported a 25 per cent fall in estate agency members since the launch of OnTheMarket, said on Thursday its aim is to build a platform where consumers can "research, find and manage their home".

The deal includes a possible additional payment of up to £30m for uSwitch's management if they meet revenue and earnings targets for fiscal 2016 imposed by Zoopla. Its new parent is aiming for an increase of about 25 per cent on its 2014 figures.

Alex Chesterman, Zoopla's founder and chief executive described the acquisition as "transformational" and "a meaningful step" to be the market-leading resource for consumers and property professionals.

He said uSwitch fitted well with Zoopla because 92 per cent of its revenues are from home services, rather than financial services.

Mr Chesterman set up Zoopla, which has 500m users compared with uSwitch's 50m, in 2008 and the company was worth £919m when it listed last June. Its share price rose from 220p to a high of 275.25p in July before falling to 150.8p in January after the launch of OnTheMarket.

Zoopla's move into price comparison throws it into competition with Moneysupermarket.com, Gocompare and Compare the Market. This sector is highly competitive and the biggest sites have together been spending hundreds of millions of pounds on marketing, including expensive TV advertising campaigns such as Compare the Market's family of Russian meerkats.

Moneysupermarket, the UK's largest price comparison site by market share, has in recent years made a big push into home services to challenge uSwitch. The FTSE 250 company reported on Thursday that its revenues from home services surged 141 per cent in the first quarter to £12.3m

Founded in 2000, uSwitch has seen its revenues grow from £43.5m in 2012 to £62.9m last year and its adjusted earnings before interest tax, depreciation and amortisation rise in the same period from £13.1m to £16.2m. Its largest shareholder is Lloyds Development Capital, the private equity arm of Lloyds Banking Group, and management own about 10 per cent of the company.

Mr Chesterman said it would continue to be run as a separate site because it has a "halo effect". "It's viewed as the Which? of price comparison websites," he said, referring to the consumer advice group.

Analysts welcomed the acquisition because it would differentiate Zoopla from rivals Rightmove and OnTheMarket. Sohil Chotai, of Edison Investment Research, said it would "allow Zoopla to offer greater user engagement, an enhanced customer experience - as well as revenue synergies from new products"

Zoopla's largest shareholder, the Daily Mail and General Trust, has approved the acquisition.

Steve Weller, uSwitch's chief executive, said he was "looking forward to the next phase of our journey".

The acquisition will be financed through a combination of cash and a £150m unsecured revolving credit facility with Royal Bank of Scotland and Lloyds Banking Group as the lead arrangers.

Mr Chesterman said he was still on the lookout for other acquisition opportunities but that he had no immediate plans.

He acknowledged the impact of OnTheMarket but said the rate of churn of membership had returned to "nearly normal levels". "The competitive threat has diminished significantly and we see no impact on the business numbers," he said.

Zoopla also released its results for the six months to the end of March, which showed a 23 per cent fall in the number of estate agency members to 12,449 as companies moved to rivals. However, the number of overseas members rose 89 per cent to 664 and the number of developers increased 6 per cent to 2,781.

It said it anticipated revenues of £41m and adjusted ebitda of £21m during the period. Its blended average revenues per agency rose 13 per cent to £340 in the six months.

Lincoln International advised uSwitch and Lloyds Development Capital while Torch Partners advised Zoopla. Jefferies also acted as a sponsor and financial adviser.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation