Property website says £190m deal creates single portal for consumers to find and manage their home
Property website Zoopla is buying the price comparison site uSwitch in a deal worth up to £190m, bringing together two well-known UK consumer brands.
The parent company, Zoopla Property Group, which also owns PrimeLocation, is paying £160m plus a performance-based fee of up to £30m.
USwitch’s institutional backers LDC – the private equity arm of Lloyds Banking Group which held a majority stake of 57% – and Forward Private Equity, have sold their holdings. The firm’s management, led by CEO Steve Weller, has also sold its combined 10% stake, worth £16m. LDC, which backed a management buyout of uSwitch in August 2013, is making 2.4 times its original investment of £35-40m.
Shares in Zoopla jumped 14% to 210p on news of the deal but remained below the flotation price of 220p. When the company made its stock market debut in June it had a market value of nearly £1bn. Daily Mail and General Trust owns 52% of Zoopla.
Zoopla, which gets 44m visits a month, said bringing together the brands was a “natural next step” that would create a single portal where consumers could find and manage their home. Its founder and chief executive, Alex Chesterman, hailed the deal as “transformational”.
USwitch helps consumers find the best deals for energy and broadband and generated about 50.3m online visits last year. It had revenues of £63m and adjusted profits of £16m in 2014. The site was founded in 2000 by Lord Milford Haven, a cousin of the Queen, to take advantage of the deregulated gas and electricity markets, which allowed consumers to switch suppliers.
Zoopla, launched in 2008 when house prices were falling as the financial crisis took hold, and its bigger rival Rightmove have become the two most popular property websites over the past decade, tapping into the UK’s property obsession. However, the pair face growing competition from a recently launched website, OnTheMarket.com, which is backed by more than 5,000 estate agents, including Savills and Knight Frank.
It looks like Zoopla is losing out most – OnTheMarket said recently that 90% of agents using its site had dumped Zoopla rather than Rightmove. Zoopla said on Thursday it had lost 950 agents to OnTheMarket since the latter’s launch in January, out of a total 3,800 agent losses which took the overall number of agent members to 12,449, but added that the rate of losses was slowing.
Zoopla’s trading statement also showed traffic was up by 11% to 265.5m in the six months to 31 March. Mobile visits rose 34% and account for nearly two-thirds of monthly visits.
USwitch was among the price comparison sites criticised by MPs in February for “duping” customers into deals that are not the cheapest on the market. Weller told the energy and climate change committee that he was “sincerely disappointed” that a customer was mistakenly told that the cheapest deal was with First Utility. It was not the first time the firm was accused of misleading customers, along with other sites.
Numis analyst Gareth Davies described Zoopla’s purchase of uSwitch as sensible and its trading update as solid. Robbie Capp at UBS agreed: “We see this as a very attractive acquisition for Zoopla, with a strong strategic fit at a reasonable price.”