Buying a home is a long, complicated, expensive process. So too, apparently, is marrying two big players in the online real estate marketplace. Zillow's (NASDAQ:ZG) pending buyout of rival Trulia (UNKNOWN:TRLA.DL) -- first announced this past July -- has again been delayed. It's the latest in a lengthening series of halts. Why is this happening, and could it mean that the deal is now at risk?
It probably wasn't the late Christmas present Zillow and Trulia investors were hoping for. On Dec. 26 both companies, in a joint Securities and Exchange Commission filing, announced they were pushing back their tie-up; it'll now happen after next Feb. 15. This is only two weeks later than the previous deadline. This new line in the sand is the third extension of the proposed merger date.
It follows a request in early September from the Federal Trade Commission -- which is to rule whether the deal runs afoul of antitrust regulations -- for additional material from both companies.
That isn't particularly unusual; in fact, it's a good sign. It indicates that the FTC is taking care to get as much information as possible about the merger, and not rushing into a decision that will substantially alter the online real estate segment.
It's also encouraging for Zillow and Trulia shareholders. It shows that their firms are not pushing aggressively for a decision, rather letting the Commission do its work. That lack of pressure might win points from the regulator.
Perhaps those gold stars won't be necessary, nor will the wait. Zillow and Trulia made sure to mention in their filing that the new voluntary deadline does not "[prevent] the parties from consummating the Proposed Transaction sooner if the FTC grants early termination, closes its investigation or accepts for public comment a proposed consent agreement settling the matter."
We shouldn't be surprised if that early approval happens. The FTC is looking at the deal simply because Zillow and Trulia are relatively huge in their segment -- at the moment, their market capitalizations stand at $4.2 billion and $1.7 billion, respectively.
But it's hard to argue that the combined entity will have a stranglehold on the online real estate space. Privately held Redfin, for one, is a popular Internet destination and mobile app download, and the same can be said for Realogy's ZipRealty. There are a score of other sites and apps that provide essentially the same real estate listing function.
What should come next
Glancing at their respective regulatory filings over the past year or so, both Zillow and Trulia seem fairly open about the state and potential of their businesses. Their recent, patient actions deferring to the FTC also indicate that they have little to lose from a drawn-out review of their merger deal, should it come to that.
If I were a gambling man, I'd bet it won't. These are two rather straightforward businesses operating in a space that still has plenty of competition. Look for the merger to get the FTC's approval sometime in January and for the deal itself to be consummated soon after that.