CoStar Group is heading to court over a nearly $60 million break-up fee levied a week after the company’s attempted acquisition of Rent Path was spiked following an intervention by the Federal Trade Commission.
RentPath, which filed for Chapter 11 bankruptcy in late February 2020 prior to the attempted $587.5 million acquisition by CoStar, petitioned a bankruptcy court in Delaware to expedite payment of the break-up fee, which is currently being held in escrow. The letter demanded the payment within two days from the Dec. 29 filing.
“As you are aware, time is of the essence,” Marlon Starr, the senior vice president and general counsel of RentPath Holdings, wrote in a letter to CoStar Group. “The Company cannot afford any delay with respect to the release of the escrow funds.”
CoStar Group filed an “adversary proceeding” against RentPath on Jan. 4, according to a filing with the U.S. Securities and Exchange Commission. According to the filing, CoStar Group is seeking a declaratory judgment that it is not obligated to pay the break-up fee, arguing Rentpath was in breach of the purchase agreement by terminating it in the first place.
The entire complaint, which was first reported by The Real Deal, is currently redacted in the public database.
CoStar — which operates rental sites Apartments.com, ApartmentFinder.com and ForRent.com — announced in February 2020 it was set to acquire rival RentPath, which operates Rent.com, ApartmentGuide.com, and Rentals.com.
In November, the FTC stepped in to object to the deal on the grounds that the acquisition would increase concentration in the already highly concentrated market for internet listing services advertising for large apartment complexes in 49 U.S. metro areas.
Despite the failed deal and continued bankruptcy proceeding, RentPath, at the time of the FTC’s intervention, appeared to be moving forward with re-investing in its own business.
“We have a range of high growth products that complement our core apartment search websites, and we are excited to emerge from restructuring and continue to build on this foundation,” RentPath CEO Dhiren Fonseca said in a statement last week.
CoStar Group also appears to be moving on, with its focus turned to the residential real estate sales space. CoStar Group announced it was acquiring residential real estate listing portal and technology company Homesnap, as well as the URL houses.com to power its entry into the residential real estate industry, in late 2020.
“In business, like in hockey, you do not win by skating to where the puck was,” Andrew Florance, CoStar Group’s founder and CEO, told Inman, in a statement last week, when asked about RentPath pulling out of the deal. “You win by skating to where the puck is going to be.”