Online estate agent Purplebricks is set to speed up its overseas expansion after receiving a £125 million investment from Axel Springer.
The German publisher and property portal owner has bought an 11.5% stake in Purplebricks, which will be used to fund a faster roll-out of the hybrid agency in the US, prepare for entry into new markets and improve its IT systems.
Berlin-based Axel Springer’s investment echoes the Daily Mail’s involvement with Zoopla, and is being led by its classified advertising chief Andreas Wiele, who joins the Purplebricks’ board as a non-executive director.
Axel Springer also operates several leading European versions of Rightmove, including SeLoger, Immowelt and Immoweb.
Like many UK publishers who have invested in digital media in the past, the move is designed to offset the huge migration by many agents from traditional publishing to online.
It also suggests an imminent move by Purplebricks into European markets such as Germany and France.
“Under the leadership of its founder Michael Bruce, Purplebricks has created a highly innovative digital real estate platform and has become the clear market leader in the UK in a short space of time,” said Wiele. “For Axel Springer, this minority stake offers the opportunity to participate in an innovative, fast growing business model in new markets.”
The deal is being funded through a £100 million purchase of new shares in Purplebricks, and the buy-up of existing shares from several of Purplebricks’ senior management team.
“The strategic partnership with Axel Springer is ground breaking and will propel Purplebricks further towards our strategic goals and global ambition,” said Purplebricks’ chief executive Michael Bruce. “We now have the platform, funding and, through Axel Springer’s experience, as well as the appointment of four new leading non-executive directors, the expertise to achieve our vision.”
Alongside its announcement of a major new shareholder, Purplebricks said full-year group revenues were likely to be 5% below the consensus estimate of about £98 million.
It blamed the “beast from the east” snowstorms as a culprit, saying that “adverse weather” and “some UK underlying softness” were to blame.
However, the agency said its US and Australian markets were on track to meet expectations, and year-on-year revenue growth for the group would be roughly 100%.
Purplebricks said £100 million of Axel Springer’s investment would be used to boost its cash resources in order to accelerate its US rollout, support entry into new markets and improve its technology and features. Already operational in California, Purplebricks is due to launch in New York in April.
DealMakerz thinks the deal is good news for Purplebricks, which has suffered in recent months because of controversy over its sales figures.
The company has also been criticised by the advertising watchdog. In October, the Advertising Standards Agency partially upheld a complaint against Purplebricks, ruling it had misled customers over the fact it charges a fixed listing fee regardless of whether or not a property sells.
The revenue warning is a blow, but hopefully the new investment, as well as Axel Springer’s expertise, point to a more positive future for the UK’s largest online estate agency.