Good day, and welcome to the News Corporation Conference Call. Today's conference is being recorded. Media is invited on a listen only basis today. At this time, I would like to turn the conference over to Mike Florence, Senior Vice President and Head of Investor Relations. Please go ahead.
Good morning and thank you for joining. On the call today are Robert Thompson, Chief Executive and Bedi Singh, Chief Financial Officer of News Corp. After today's prepared remarks, we'll be happy to take questions from the investment community. A slide presentation to accompany today's call can be found in the Investor Relations section of our website, newscorp.com, along with the press release and an audio webcast of the call. Before we begin, let me remind you that this conference call includes forward looking statements that involve certain risks and uncertainties that could cause actual results to differ.
Information regarding these risks and uncertainties is contained in our Safe Harbor disclaimer on slide 2 of the presentation and in our SEC filings. In addition, nothing in the presentation should be deemed to be an offer to buy or a solicitation to sell any securities. For further information, see slide 2 of the presentation. I'll now turn the call over to Robert.
Thank you, Mike. It is a profoundly important moment at NewsCall because the transaction we announced this morning to acquire Move will position the new news at the forefront of the burgeoning U. S. Online real estate sector and significantly expand our digital presence. We'd like to take a few minutes to explain why we're excited about this agreement to acquire Move and why we think this is a great transaction for our shareholders as we continue to transform the company and build on its very proud traditions.
Let's begin by turning to slide 3. Move is a leading digital real estate company in the U. S, providing home listings, advertising products and software for realtors and brokers. We think there is a remarkable opportunity to establish an industry focused digital real estate platform in the U. S.
That serves consumers and realtors, a market with approximately $14,000,000,000 in annual marketing spend by real estate agents and brokers and significantly more in property financing. We believe Move is in a unique position to be the major player and expect its growth to be turbocharged by News Corp given our powerful content platforms in U. S, marketing resources and real estate expertise, including that of the eminently successful REA Group, which plans to be a 20% owner of Move and a contributor to and beneficiary of its flourishing in the future. As we highlighted on our Investor Day over a year ago, the two themes that will drive the success of the new news are digitization of our asset base and globalization. We view move as an important part of our ongoing transition to digital media across all of our businesses and our expansion in digital classifieds internationally.
Digital real estate is a particular area of expertise for us, primarily through our majority owned subsidiary REA Group, which is the leading digital real estate company in Australia with a market capitalization of US5 $1,000,000,000 and revenue of more than US400 $1,000,000 dollars REA brings significant sectoral expertise and software and product skills to the table. And we think those skills will transfer well to the U. S. Market. We also know real estate well through our newspapers, which have much experience editorially and commercially, whether it be the prospering mansion section of The Wall Street Journal or our other media properties in the U.
S. Including The New York Post and elsewhere in the world. The Wall Street Journal digital network, which includes MarketWatch and Barron's has on average 500,000,000 page views each month and every single one of these pages will be a marketing opportunity for Move. In short, News Corp is not new to real estate and we expect our knowledge of the market as well as our technological, marketing and content capabilities will be deployed rapidly to fast track Move into the future. This transaction represents the most significant acquisition we have made since launching as a separate company last summer.
We remain committed to a balanced long term approach to capital allocation among organic investment, strategic M and A and return of capital. We view MOVE as a continuation of the strategy to aggressively pursue new opportunities where we can utilize our global platform and scale, opportunities which inherently complement and extend our expertise. These are carefully considered investments. Turning now to slide 4. The U.
S. Real estate market, the world's largest, has room for robust growth in coming years and perhaps most importantly is still in the early days of its digital transition. There are approximately 2,000,000 real estate agents and brokers in the U. S. Generating about $60,000,000,000 of commission income annually.
On sales alone, they are forecast to spend $14,000,000,000 on marketing in 2014 and move at the moment captures only around 2% of that spending. We believe there is much room for that percentage to grow because the market is in the midst of a secular shift to digital advertising as real estate agents seek to reach home buyers where they are spending their time and searching for homes that is online. We're bullish about MOOP's prospects as more marketing is directed online and realtors demand state of the art software to maximize their returns. We look at competitors in the U. S.
Market as well as other platforms around the world as important indicators as of the size of the opportunity. According to Euromonitor, there are 259,000,000 Internet users in the U. S, nearly 5 times that of the U. K. And 14 times that of Australia.
According to census data, 5,000,000 homes are sold per annum in the U. S, 5 times that of the U. K. And 10 times that of Australia. There is certainly a huge variation in valuation versus market potential across these geographies.
Thus, we think there is an enormous opportunity for value creation in the U. S. Given the early stages of the shift to online advertising for real estate and the overall size of the market relative to the markets in Australia and the U. K. That is aside from the value that we believe move will create for our core properties in the U.
S. Given its ability to generate extremely valuable data around the most important investment decision any family or individual will make, buying a home. Ponder the potential to generate sales in New York for The Wall Street Journal and The New York Post around searches for property in the Greater New York area or the ability of News America Marketing to provide high quality, lower cost inserts for realtors and brokers around the country. Let's look at Move in more detail on Slide 5. Move is a leading real estate information marketplace for several reasons.
1st, Move has a unique partnership with the National Association of Realtors. That partnership provides the company with deep relationships and marketing resources. 2nd, Move sources listings data directly from over 800 Multiple Listing Services or MLSs providing over 98% coverage of all existing homes listed for sale in the U. S. 3rd, Move owns and operates ListHub, which syndicates listings to over 130 publishers across the web, including to Zillow and Trulia.
Most importantly, realta.com has the freshest, most accurate for sale listings in a market in which speed and accuracy are crucial sources of comparative advantage. Turning to slide 6. We'd like to spend a moment on Move's unique relationship with NAR, the National Association of Realtors. Realtors and brokers along with NAR are an important part of the real estate ecosystem. We are looking forward to creating a platform that provides long term support for the value that agents provide in the marketplace.
We think this is highly differentiated in the market and will help attract business to move. I'll pause here to address Zillow's proposed acquisition of Trulia. We do think this development helps illustrate the size of the opportunity in the U. S. Given the current valuations of those two companies.
We certainly expect competition from Zillow, even though the 2 companies face the manifold complexities of consolidation in coming years. However, our strategy is quite different to that of Zillow and Trulia. We see tangible and enduring value in the role of realtors who are pivotal in navigating the sale and the acquisition of real estate, whether it be in arranging inspections or in providing background intelligence that is essential for market participants. And we see a growing role for Moov in the market. It has the right assets, the right relationship and soon the right platforms to project it into the future.
As part of that strategy, we are pleased that MOVE will continue to have the exclusive and perpetual right to operate realta.com, the official site of NA and the flagship property of MOVE. Moreover, Na has demonstrated its support for Move in the form of a dedicated advertising budget that emphasizes the value of realtors through realtor.com. We plan to continue working closely with NAV to express the value of dotcom to consumers and to highlight the social and commercial role of Realtors. As I mentioned, Move provides the most accurate and up to date for sale listing data in the industry. On Slide 7, we've outlined the fact that Move's realtor.com is the preferred destination for consumers to find the home they actually buy and is also the number one source of leads for realtors.
Over 90% of Move's active listings are refreshed every 15 minutes and the audience attracted to the site is engaged and transaction ready. Clearly, the quantity of traffic is important and we will increase that traffic, but the quality of traffic is imperative. This is rather different compared to other sites in the U. S. Market that focus on driving traffic to their sites, but do not necessarily have accurate listings on those sites.
Looking closely at the metrics, Moose audience, lead generation and conversion are the most attractive in the industry. You can measure that on highest revenue per unique user, highest engagement in the industry and highest net promoter score. Turning to slide 8. News Corp is uniquely positioned to take advantage of the opportunity that Move has both in the U. S.
And around the world. We believe that our experience in digital real estate and in audience monetization and cross platform promotion and our reach will be decisive. We are committed to this opportunity, excited about the powerful combination that this transaction creates in a market poised for substantial expansion and very conscious that success will depend on rapid and intense execution. We are laying firm foundations for the future of Move and of the new news. Let's now turn to slide 9 and to Bedi Singh, who will walk you through the financial terms and the structure of the transaction.
Thanks, Robert. We will launch a tender offer for all of Move's outstanding shares for $21 a share to commence within 10 business days. Based on Move's fully diluted share count as of August 31 this year, we expect that this all cash tender offer will approximate $950,000,000 net of Move's existing cash balance and will be funded wholly from News Corp's available consolidated cash balance. As Robert mentioned, REA Group, which is majority controlled by News Corp, plans to hold 20% of Move with the remaining 80% to be held directly by News Corp. We expect to leverage REA's product expertise and listing monetization capabilities and for REA to play a very important role in driving both innovation and operating performance at Move.
News Corp. Will consolidate Move and we expect that REA will equity account for its 20% share. For the year ended December 31, 2013, Move reported revenues of 227,000,000 dollars and adjusted EBITDA, which excludes stock based compensation of approximately $29,000,000 and reported net income of $574,000 In the 1st 6 months of 2014, Moov has started to increase its marketing spend to generate higher traffic and we intend to continue to reinvest in both marketing and product development to advance move into a leadership position in the U. S. Online real estate sector.
As a result, we expect the acquisition will likely be very modestly EPS dilutive in the short term. As of December 31, 2013, Moove had approximately $750,000,000 of available gross NOLs against which the company recorded a full valuation allowance in accordance with U. S. GAAP. As Robert mentioned, we expect to drive significant growth at Move by leveraging our existing asset base and marketing expertise and therefore expect that Move would be able to utilize these existing NOLs in the future subject to IRS rules and limitations resulting from the change in ownership.
Following this acquisition, News Corp will continue to maintain very strong financial flexibility and expect to continue generating positive free cash flows. We will also evaluate any future investments and cap returns with the goal of maximizing long term value per share. We expect that this transaction will close in the Q4 of calendar year 2014, which is our Q2 of fiscal 2015. Now back to Robert.
Thank you, Behi. Before we open the line to questions, I'd like to reiterate why we are excited about this transaction. We believe there is a massive market opportunity in the U. S. For online real estate revenue and this market is in the early stages of development.
Move is a differentiated platform that provides significant value to consumers as well as to realtors and brokers. Digital real estate is an important pillar in our ongoing global and digital transition at News Corp and represents a prudent deployment of our capital. Move complements and will enhance our core media assets. With that, operator, could you please open the line for questions?
Thank We'll take our first question from John Ioannidis from Jefferies.
Newspapers reached earlier. If we think back to print real estate classifieds maybe a decade or so ago, the market's really now shrunk to well below $1,000,000,000 So can you talk about where you're looking for growth outside of the growth in the industry and to what extent a slowing in the market impacts overall revenue growth?
I'm sorry, John, I missed the initial part of that question.
So if we think back to say print real estate classifieds, a decade ago, the markets probably shrunk by 90 plus percent to a point where it's something around maybe $750,000,000 And so can you just talk to where the growth comes from? And if the market slows, how that affects your revenue opportunity?
Well, John, this is very much a digital opportunity. In sales alone, the U. S. Market is around $14,000,000,000 Mortgages on top of that advertising, marketing money is around $11,000,000,000 Rentals, dollars 3,000,000,000 Builders and Developers, another $2,000,000,000 Those are big and growing numbers. And that's where the opportunity lies for News Corp in the development of Move as we projected into the future using the media platforms we have.
And those media platforms certainly print is an important part of those platforms, but digital also has a growing burgeoning role in the company. And those I think you need to see it as a combination of platforms. We are in the era of the platform. Move is itself a platform. News Corp is a collection of extremely powerful platforms, which will have a multiplier effect.
If you think about those 4 platforms then Robert, which one is the one do you think that offers the most opportunity?
Among the properties in the U. S?
Yes, agents and brokers, mortgages, etcetera, yes.
Well, clearly each of them is an opportunity. We're focusing on sales. Clearly that's the $14,000,000,000 opportunity. But as part of the agreement with NAR, we have an opportunity to engage more in financial marketing related to real estate transactions. That's a new area of potential growth.
And also rentals is an area that developing, which we will obviously turbocharge.
Hey, John, it's Baty here. I mean the other thing to note is the $14,000,000,000 has actually grown quite a bit over the last 2, 3 years. It was like $11,000,000,000 roughly I think in 2012. So there's growth in that sector plus move itself is a very small piece of the online real estate revenue right now. I mean all the companies in this sector are very small in terms of revenue.
So there's big potential I think to take more out of the existing online total spend as well.
Operator, we will take our next question please.
And our next question is from Adam Alexander with Goldman Sachs.
Good morning, guys. Robert, as we've seen in Australia, the experience has been that the second or third player in real estate classifieds has really struggled to gain a lot of traction. Just wondering how you are going to ensure that move doesn't become this sort of second or third player, particularly given the size and marketing budget of a combined TruliaZillow combo?
Well, first of all, the combined TruliaZillow will have all the complications that go with that consolidation over the coming years as we mentioned. Secondly, these are 2 markets at very, very different stages of their evolution. As Betty mentioned, the amount that these companies have of the total marketing spend is minuscule compared to that of a market like Australia. So the potential growth and the prize associated with that remains to be contested. And what we will certainly do is use all of our marketing muscle, use those platforms to project move in a way that hitherto hasn't been the case.
And Adam, just to add to that, if you see Move's own track record, they've actually been picking up steam. And I think they have an increasing audience share. The revenue is going up. So they're actually doing pretty well.
Operator, we will take the next question please.
And our next question from Entcho Raykoski, Deutsche Bank.
Good morning, Robert. Good morning, Betty.
My question is around the relationship with the NIR. And as I understand it, they aren't the domain name of delta.com, and please let me know if that's not the case. But in that context, is that something which is likely to constrain growth longer term in terms of the pricing which you can charge realtors? Or do you feel as though you're well positioned in that context?
Not at all. We have a clear understanding with NAR. Well, first of all, about the an understanding that about the perpetual rights of usage of the brand. So that's certainly not a problem. And in terms of competitive pricing, there are no restraints whatsoever.
And it's clearly in the interest of realtas for realta.com to become the dominant player in the market. And for that to be the case, it needs to be both extremely prominent and extremely profitable. So the vested interests are very much shared and we have the flexibility that we need to make move even more successful than it is now.
Thank you. Operator, we will take the next question please.
And our next question is from Barry Lucas with Gabelli and Company.
Maybe you could explain the kind of background of the structure, why the eightytwenty split? Are there any advantages, tax or otherwise? And given the 8% leakage, if you will, on an attributed basis, what are the other disadvantages to splitting up the ownership with REA?
Well, certainly, eightytwenty does have tax advantages, which Bedi can explain to you in more depth momentarily. But look, we have a majority stake in REA. And we believe that for ourselves and for all REA shareholders, the participation in this deal is of extreme value. Certainly valuable for Move to be able to connect with REA whether it be in software, whether it be in marketing mechanics, whether it be in technology, whether it just be in market nows because there's no doubt about REA's success and sharing that success will be a benefit to move. And for REA to get lessons back from the competitive U.
S. Market will also be valuable. Betty on the question of tax.
Yes. Barry so with 80% we can consolidate move into our U. S. Tax group which is beneficial to us. Consolidate move into our U.
S. Tax group, which is beneficial to us. And obviously, as I mentioned before, we have hopefully access to the NOLs in the future.
Operator, we will take our next question please.
And our next question from Jason Helfstein with Oppenheimer.
Thanks. So can you just talk about is there a minimum number of shares and to the extent that there are investors who if they choose not to tender the shares, are you willing to leave remaining small public stubs out there? Thank you.
Well, I'll let Adi explain to you how the law in Delaware works.
Yes. So I mean with the tender offer, I think we need a majority of the shareholders to vote and we'll be taking out everybody else. There'll be no stub left out there.
Okay. Operator, we will take our next question please.
And we have Lance Vitanza with CRT Capital Group.
Hi. Could you talk a little bit about the valuation, the 32 times last year's EBITDA, 16 times consensus for 2017? What is it that gives you comfort that $950,000,000 is the right price?
Well, we certainly think it's the right price given the potential for growth in the company. There's no doubt that in the last 18 months, its performance has picked up in terms of revenue and audience growth. We intend to ensure that that pickup is accelerated and expedited. We'll definitely turn up both the voltage and the wattage. It is a market in the early stages of its evolution, exponential evolution.
And clearly evaluations for a digital market of this size and of this potential are different. You only need to witness the $3,500,000,000 evaluation for Trulia. We think this is a much better deal. We think that given the relationships that Move has that its potential long term to not only succeed in this market, but to triumph is real.
Okay. Operator, we'll take our next question please.
And our next question from Mitch Bartlett with Craig Hallum.
Sure. In light of that last answer that you gave, do you have plans to step on the accelerator as far as the marketing? This is a very competitively marketed sector right now in its infancy. There's investment by move. There's investment by the National Association of Realtors.
Would you be incrementally marketing more aggressively?
We will not be increasing incrementally. We'll be increasing fundamentally. And you're quite right that marketing for this market at this time is a crucial component of success. But what we have is the comparative advantage of these extraordinarily influential and powerful media platforms, whether it be MarketWatch, whether it be The Wall Street Journal or whether it be Barron's. As I said literally every page viewed and that's 500,000,000 pages every month is a marketing opportunity for Move and we fully intend to exploit that opportunity.
Operator, we'll take our next question please.
And our next question from Chris Merwin with Barclays.
Hey, thanks. Just another follow-up in terms of the marketing strategy. You talked about how you plan to leverage the WSJ digital network and then some of the other properties that you have. Is that at all cannibalistic of any inventory you might have sold? And would that in any way incentivize you in the future to invest in some other channels?
And I guess the second question is, how big a lift right away could you get in the traffic just from leveraging the properties that you have today? Thanks.
Well, it would be inappropriate to give a precise forecast given that we haven't started yet. But I think you can expect a significant lift. There's no opportunity cost there. I mean what there is, is an opportunity also for those publications to benefit from the marketing platform that is moved. As I said, when someone is looking for a house in Westchester at a certain valuation, a certain number of bedrooms, it's pretty clear that that particular person is a potential Wall Street Journal subscriber or a potential New York Post subscriber.
We fully intend to take advantage of that marketing opportunity as well.
Okay. Operator, are there additional questions?
We have no additional questions in the queue at this time. And we have no further questions at this time. I'll turn the conference over to Mr. Mike Florin for closing remarks.
Well, thank you all for participating and we look forward to updating you on our progress. Have a great day.
Thank you.
This does conclude today's conference. Thank you for your participation.