REA to buy controlling stake in Elara Tech for up to $70 mn; News Corp to raise stake

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 percent 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. It first started with PropTiger.com and since then it has grown significantly both organically and inorganically with the acquisition of Housing.com and Makaan.com. Its revenues grew at a CAGR of 42 per cent over the last three years and organic traffic on Housing.com rapidly increased at a CAGR of 56 per cent in the period Sep’17 – Sep’20.