Rent.com Chooses To Be Acquired By EBay Instead Of Going Public        
By Marine Cole

12/20/2004

       
Rent.com, which had been planning to follow in the footsteps of several other Internet start-ups in the real estate market and go public, has instead opted to be acquired by eBay Inc. for $415 million.

"Going public was a very viable option," said Scott Ingraham, chairman and chief executive of the rental properties Web site. "But the opportunity to be part of eBay was too good of a deal to pass up."

While planning to go public, "another company came in and made us an offer," explained Klaus Koch, a Rent.com board member and a partner with Kline Hawkes & Co., which invested a little over $3 million in the company. Investors then decided to look at the acquisition path, which led to offers from several companies, including two Internet-based companies and one company that wasn't Internet-related. "EBay was the best offer."

Rent.com's IPO plans came at a time when real estate companies were attracting lots of market interest. For instance, ZipRealty Inc., an online real estate broker, saw its shares rise 25% on first day of trading last month. HouseValues, which operates an online database of house buyers and sellers for real estate agents, filed for an IPO in September with an estimated price range at $10 to $12 a share.

"We knew that ZipRealty was going out, and part of the reason that we got the price that we did is because we had a real chance of going public," Koch said. "But there're more risks with an IPO, and eBay has so much to bring to the company. They'll deliver traffic."

San Jose-based eBay expects to fund the deal with $385 million in eBay common stock and $30 million in cash, and anticipates that it will close in the first quarter of 2005.

"We're ecstatic. It's a great deal." said Koch. "The company started in 1999 and the first institutional investment was made in 2000. I think there's not a lot of people who made money from investments made in 2000."

Koch anticipates that most investors will hold on to their eBay stock, and added that Kline Hawkes might give its eBay stock to California Public Employees' Retirement System, one of its main limited partners that also holds eBay shares.

Santa Monica, Calif.-based Rent.com allows apartment owners and managers to list properties on its Web site for no charge and pay fees only for leases produced through the company's site. Koch said that it will become a wholly owned subsidiary of eBay, and he anticipates that all 83 employees will remain with the company after the acquisition closes.

"I will continue as the head of the company, but my title will change," Ingraham said.

Rent.com expects 2004 revenue will be more than $40 million. In October, eBay raised its 2004 revenue target to $3.25 billion from $3.19 billion.

Rent.com, previously called Viva.com, raised about $30 million in three rounds of financing, including an angel round and two major rounds in 2000. Investors include Banc of America Mortgage Capital Corp., a subsidiary of Bank of America Corp.; Insignia Financial Group; Allegis Capital; Rosewood Venture Group and Kline Hawkes.

Apartment rental companies Archstone Communities, AvalonBay Communities, Camden Property Trust, Equity Residential Properties Trust, Gables Residential, Post Properties and United Dominion Realty have also invested in Rent.com.