Real estate giant Realogy Corp. (NYSE: H) today announced an agreement to settle “purported consolidated class-action litigation” that followed the announcement of a proposed buyout by affiliates of private equity firm Apollo Management. That deal is worth about $9 billion.
Realogy and Apollo have entered into a memorandum of understanding in an effort to resolve the complaint, Realogy announced today, while denying wrongdoing or liability. The agreement is intended “to avoid the burden and expense of further litigation,” according to the announcement.
Last year, Realogy formed as an independent company through a spinoff of Cendant Corp.’s real estate division. Realogy’s company-owned and franchise brands include Coldwell Banker, Century 21, ERA and Sotheby’s International Realty. The merger proposal was announced in December.
The agreement with the parties who brought the complaint provides for more disclosures in the documentation for the proposed merger, a limit of $180 million for the termination fee payable to Apollo if the buyout falls through, and also relates to “the time periods applicable to the exercise of stockholders’ appraisal rights,” Realogy reported. The dismissal of the litigation is subject to court approval and other conditions.
Realogy officials did not immediately respond to requests for comment.
Apollo Management is among a group of buyout firms that are accused in an earlier investor lawsuit, filed in Manhattan’s U.S. District Court in November, of illegally working together to keep down the prices that they pay for taking companies private. And U.S. antitrust regulators are also reportedly investigating whether such firms have engaged in anticompetitive activities.
That lawsuit charges that the firms broke antitrust laws by sharing information and making agreements not to compete against each other in bidding for buyouts.
Realogy officials also announced that the company has issued information today relating to a stockholder vote on the merger that will be held at 10 a.m. March 30 at the Hilton Parsippany, 1 Hilton Court, Parsippany, N.J. Realogy stockholders of record as of the close of business on Feb. 20 will be entitled to vote at this special meeting. The company expects to begin mailing this notice of meeting and relevant information to stockholders beginning today, according to the announcement.
“Realogy … expects to complete the merger with Apollo Management in early to mid-April 2007, subject to the adoption of the merger agreement by Realogy’s stockholders and the satisfaction of other closing conditions,” the company announced.
Realogy management estimates that its unaudited 2006 full-year revenue was about $6.49 billion and EBITDA, a measure of earnings before interest, tax, depreciation and amortization, was about $852 million for the year, which excludes “separation, restructuring, legacy costs of (Cendant Corp.) incurred by (Realogy) and merger costs.” Adjusted net income in 2006 was about $412 million, the company also reported.
The company announced that it intends to finalize its full-year financial reports for 2006 in early March.
In addition to the proposed deal with Realogy, Apollo Management also in December announced a planned deal worth $27.8 billion for Harrah’s Entertainment — the largest casino company in the world. Leon Black is the founder of Apollo Management.
Apollo Management was an original private-equity sponsor of NRT, which is now a subsidiary of Realogy that oversees company-owned brokerage operations.
NRT was formed in 1997 through a $232 million venture by a group affiliated with Apollo Management L.P. and by HFS Inc., a predecessor to Realogy’s former parent company. HFS reportedly invested $157 million of the initial financing for NRT while Apollo invested $75 million.
