Australia-based REA Group Ltd will increase its shareholding and acquire a controlling stake in Elara Technologies, which owns three leading realty portals including Housing.com, in a cash and equity deal estimated up to USD 70 million.
US-based News Corp too will increase stake in Elara Technologies, which also owns PropTiger and Makaan.com, by acquiring preference shares worth USD 34.5 million.
After the completion of the deal, REA's stake will increase from 13.5 per stake to anywhere between 47.2 per cent and 61.1 per cent, while News Corp's stake will increase to 38.9 per cent from 22.1 per cent.
Elara Technologies have so far raised USD 105 million equity from various investors including News Corp and its Australian group firm REA, Softbank, Elevation Capital and Accel. Elara has also raised USD 70 million debt, which will get retired from this deal.
Elara will continue to operate as a stand-alone entity within the REA Group structure. Dhruv Agarwala, co-founder and CEO of Elara, will continue to lead the company.
REA Group said in a statement that it has "entered into a binding agreement to increase its ownership interest in Elara Technologies Pte. Ltd."
On completion of the deal, REA will hold five out of nine board seats.
"The total consideration for the transaction is expected to be in the range of USD 50 million - USD 70 million with USD 34.5 million payable out of existing cash reserves and the balance in newly issued REA shares," the statement said.
REA has agreed to subscribe for USD 34.5 million of preference shares in Elara to fund the repayment of 50 cent of Elara's debt facility and also buy out three Elara investors representing 11.7 per cent stake.
Following REA's subscription of preference shares in Elara and acquisition of shares of the three existing shareholders, REA's stake will increase to 47.2 per cent.
REA will offer to acquire all remaining shares in Elara, with the exception of News Corp's shareholding, representing a combined shareholding of 13.9 per cent. If its offer is accepted, then the REA stake will reach 61.1 per cent.
Separately, News Corp has agreed to subscribe for USD 34.5 million of preference shares in Elara to fund the repayment of the remaining 50 per cent of Elara's debt facility.
Following this, News Corp's shareholding in Elara will increase from 22.1 per cent to 38.9 per cent.
According to market sources, the deal has been entered at an enterprise value of over USD 160 million (around Rs 1,200 crore).
Commenting on the deal, REA Group CEO, Owen Wilson said: "India is an incredibly attractive market and one that provides excellent long-term growth opportunities, while complementing REA's footprint in Australia, Asia and North America."
The country is forecast to deliver strong growth over the next decade as it continues to experience rapid digital transformation, he said.
We plan to make significant investments in Elara going forward. With over 700 million internet users and roughly half a billion yet to come online, our increased investment in Elara will allow REA to be at the forefront of the considerable long-term opportunities within India, and the digitisation of the real estate sector, Wilson said.
Agarwala said: With access to capital and expertise from REA we will continue to launch new products in the market to enhance the consumer experience and make the process of home buying, selling and renting simpler, more digital and more transparent."
Wilson said this transaction creates a unique opportunity to leverage the combined talent and digital expertise of REA and Elara to become the market leader in India.
Elara offers a full range of residential property services across digital advertising and transactions. Itfirst started withPropTiger.comand since then it has grown significantlyboth organically and inorganically with the acquisition ofHousing.comandMakaan.com.
Its revenues grew at a CAGR of 42 per cent over the last three years and organic traffic onHousing.com rapidly increased at a CAGR of 56 per cent in the period Sep'17 - Sep'20.
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