Photograph by Andrew Harrer — Bloomberg via Getty Images
By Dan Primack
November 18, 2014

When Zillow (Z) announced in August that it had agreed to acquire rival online real estate platform Trulia (TRLA) for $3.5 billion in stock, my immediate reaction was to wonder why such an obvious merger hadn’t happened earlier. Apparently it wasn’t for a lack of trying on Zillow’s part.

Strike one: Zillow first approached Trulia about exploring a “strategic business combination” back in late 2011 — shortly after Zillow had gone public, and while Trulia was still privately-held — according to documents filed by Trulia today, ahead of its planned Dec. 18 shareholder vote on the merger. Trulia hired Qatalyst Partners as an advisor but, by early 2012, had determined that its “stand-alone prospects would provide superior long-term value creation for Trulia stockholders” via an initial public offering.

Strike two: Zillow next approached Trulia in August 2012, just as it filed for an IPO. Trulia again leaned on Qatalyst Partners, plus also solicited guidance from J.P. Morgan (JPM), which was serving as its lead IPO underwriter. These talks ended almost as soon as they began, with Trulia once again opting to remain independent.

Home Run: Zillow once again raised the possibility of a Trulia acquisition this past spring, as one of several possible strategic opportunities. This time, however, it took its time before making direct contact. In late May through mid-June, Zillow “entered into confidentiality agreements, and had various discussions, with certain unaffiliated significant holders of both its and Trulia’s common stock.” Then it engaged Goldman Sachs (GS) on June 1 to advise on a possible acquisition offer.

Two days later, Zillow co-founder and executive chairman Rich Barton invited Trulia CEO Pete Flint to dinner, but Flint declined the next day, saying that he couldn’t find the time. Shortly thereafter, Barton contacted Flint to tell him about Zillow’s intentions. The formal offer was made on June 9th, with Zillow offering to pay 0.39 shares of Zillow Class A common stock for each common Trulia share.

This time Trulia board was interested, with its board discussing “changing dynamics in the marketplace that made a business combination between the two companies potentially more attractive to Trulia stockholders.” But it wanted a better deal.

The two sides spent much of the next two weeks in back-and-forth conversations, including a June 23 dinner that included several executives of both companies (including Zillow CEO Spencer Rascoff, who was not mentioned in Trulia’s backgrounder until this point). The conversation was about cultural and strategic fits rather than about price, but three days later Zillow upped its offer to 0.4434 shares of Zillow Class A common stock for each common Trulia share. Trulia later negotiated the price up just a bit higher to 0.444 per share, plus received certain protective provisions like a $50 million anti-trust termination fee and up to $25 million in expense reimbursement.

On July 24, Bloomberg broke news that the two sides were in negotiations. Four days later, the two sides executed their merger agreement and announced the deal.

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