Zillow Inc. (NASDAQ:Z) said it would buy smaller rival Trulia Inc. (NYSE:TRLA) for $3.5 billion in an all-stock deal that is designed to make the combined entity the largest in online real estate advertising.
Zillow advanced 2.3 percent to $162.61 at 1:54 a.m. in New York, while Trulia surged 18 percent to $66.65.
Trulia shareholders will get 0.444 shares of Zillow for each share of Trulia, the companies said in a statement today. That’s equivalent to Zillow offering $70.53 a share for Trulia, or 25 percent above Trulia’s closing price of $56.35 on July 25.
Zillow shareholders will own two-thirds of the combined company, while Trulia stockholders will own a third.
The deal—approved by the boards of both companies—is expected to close next year.
Trulia's chief executive, Pete Flint, will continue in that role, although he'll report to Zillow CEO Spencer Rascoff. The combined company will feature both the Trulia and Zillow brands, the companies said.
Both companies offer users free access to data traditionally provided by agents and brokers' multiple-listing services.
Zillow and Trulia list properties for sale or rent on behalf of homeowners and real estate agents and generate revenue through subscriptions and advertisements.
Both sites are by far the most popular real-estate websites, according to comScore Inc. Zillow in June had 53.8 million unique U.S. visitors, while Trulia had 31.6 million.
Both Zillow and Trulia have been spending aggressively on advertising, foregoing near-term profitability, to capture a bigger share of online spending on real estate listings.
The companies said they expected the deal to help save at least $100 million per year by 2016. Between them, the companies spent $382 million in 2013, more than their total revenue.
The market for real estate search engines has improved as the housing market rebounded from the worst crash since the Great Depression, leading to a surge in Zillow and Trulia shares in the past two years. Home prices have jumped 26 percent from a March 2012 low, according to the S&P/Case-Shiller index of 20 cities. Existing-home sales climbed in June to an eight-month high as listings increased, the National Association of Realtors reported last week.
Zillow, which went public in 2011, has made several acquisitions recently, including Retsly Software Inc., a Canadian company that produces a tool to help programmers access real estate data.
Trulia's annual losses have been widening even as revenue has nearly doubled every year since 2010. Zillow's revenue has been growing at a slightly slower rate.