With Fox merger off the table, News Corp. eyes sale of Realtor.com to CoStar

While Rupert Murdoch withdrew his proposal to combine News Corp. (Nasdaq: NWSA) and Fox (NASDAQ: FOXA), News Corp. has its own deal in the works regarding its coveted consumer real estate asset - Realtor.com.

News Corp. confirmed Tuesday evening that it is engaged in discussions with CoStar Group, Inc. (NASDAQ: CSGP) regarding a potential sale of Move, Inc., operator of Realtor.com. A deal could be valued at $3 billion, according to a Bloomberg News report.

The company said it is "actively assesses opportunities to maximize shareholder value, and discussions with CoStar Group are part of that ongoing effort." Any deal would support its strategy to optimize the value of its Digital Real Estate Services segment while strengthening Realtor.com's competitive position in the market. While talks are ongoing, News Corp. said there can be no assurance any transaction will result from these discussions.

CoStar Group investors should not be surprised by the move as the company announced in the past that it was raising money to fund "strategic acquisitions". In addition, with its already dominance in the non-residential side of the business, analysts and investors were expecting the company to tackle the residential side.

BMO Capital analyst Jeffrey Silber said the acquisition "makes sense" for CoStar given: "1) CSGP's large cash position; 2) the depressed state of the residential market (advantageous for buyers), and 3) CSGP's preference for advertising model and ability to move margins higher."

The news could be seen as a negative for residential competitor Zillow (NASDAQ: Z) (NASDAQ: ZG), as Move is one of the largest advertising platforms in the US behind Zillow. Further, there were rumors CoStar could target Zillow in a deal instead.

By StreetInsider.com Staff

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