Homestore Settles Dispute With Cendant
Homestore Inc., the Westlake Village-based Internet real estate firm, said Wednesday that it had settled a dispute with its largest shareholder -- residential brokerage franchiser Cendant Corp. -- stemming from a phony-revenue scandal last year.
Homestore, which operates No. 1 real estate site Realtor .com, in January 2001 handed over 20 million shares of its stock -- at that time worth $750 million -- to buy Cendant’s competing Move.com unit. After Homestore restated its financial results, the value of Cendant’s shares, which were restricted and could not be sold, plunged to less than $20 million, and the New York franchise firm threatened legal action for misrepresentation.
No suit was ever filed, but the dispute cast a long shadow over the companies’ partnership, Homestore Chief Executive Mike Long said Wednesday. Because selling advertising and promotion services to Cendant’s 200,000 agents and brokers is a key part of Homestore’s business, the settlement “is a key part of our turnaround,” he said.
Under terms of the settlement, Homestore must by Oct. 14 register for sale the 18.3 million shares of its stock that Cendant now owns. For 60 days after the registration, Homestore will have an option to repurchase 7.26 million of those shares for the market price, but Cendant otherwise will be free to sell them. A Cendant spokesman declined to comment.
Homestore made other concessions to Cendant, notably abandoning an exclusive right to display Cendant’s listings and information about its brokers and agents online. As a result, Homestore said, it will record a $12.2-million impairment charge when it releases its second- quarter results Aug. 14.
Homestore this year settled a legal dispute with its other major partner, AOL Time Warner Inc., and recently signed business deals with other online services. Those developments have pushed Homestore’s stock from about $1 a share in early May to above $3 in recent weeks. It fell 12 cents to $3.10 on Wednesday on Nasdaq. The settlement was announced after the market closed.
Homestore still faces a lawsuit filed on behalf of shareholders led by the California State Teachers’ Retirement System that seeks to recover more than $1 billion in losses on Homestore stock. Long said he was hopeful of settling that action on terms that would benefit the shareholders but allow the company to continue as a viable business.
In addition, the government continues to investigate the role of former Homestore executives in suspect advertising deals between Homestore and other firms, including AOL. Four former Homestore executives have pleaded guilty to fraud charges and are cooperating with the government; Homestore is cooperating as well.
