Realogy settled part of its $400M Cartus lawsuit. Now what?

Sale agreement fell apart in April amid pandemic

National /
Aug.August 11, 2020 02:10 PM

Thomas Oberdorf, CEO of Sirva, and Ryan Schneider, CEO & President of Realogy (Credit: Jhila Farzaneh)

Realogy settled part of its lawsuit over the aborted $400 million sale of its relocation business.

In a regulatory filing, the brokerage conglomerate said it entered a “confidential settlement agreement” with would-be buyer Sirva Worldwide and its parent company, Madison Dearborn Partners, regarding the sale of its relocation business, Cartus. The two sides have come to terms on the termination fee related to the purchase and sale agreement, according to sources.

A spokesperson for Realogy declined to comment beyond the regulatory filing, which doesn’t indicate whether the brokerage will pursue other legal remedies to force the sale.

Realogy and Sirva announced the deal involving Cartus in November 2019. Realogy said at the time that it planned to use proceeds to pay down more than $3 billion in corporate debt. The firm is the parent company of Sotheby’s International Realty, Coldwell Banker and the Corcoran Group.

But the agreement fell apart when the fallout from Covid became clear. Sirva and MDP backed out of the transaction in April on the grounds that the pandemic had a “devastating” impact on Cartus. It further alleged Realogy was flirting with “insolvency,” which would make it impossible to close the deal. In Realogy’s August lawsuit, filed in Delaware Chancery Court, the company accused Sirva and MDS of buyer’s remorse, and say they made “false claims in an attempt to avoid their obligations under the purchase agreement.”

But on July 17, the court dismissed the suit. Realogy later appealed, asking the state’s top court to revive part of its lawsuit to compel the sale. In an August 7 letter, the lower court judge urged higher-ups to wait.

Representatives of Sirva did not immediately comment. But in a statement after the July 17 ruling, the company said it was pleased with the outcome.

“As the court concluded, Realogy — not Sirva — caused the transaction to fail,” the company said.

Like other players in residential brokerage, Realogy began cutting expenses in March. It slashed marketing expenses and executive pay and shortened employee workweeks.

Last week, Realogy said it lost $14 million during the second quarter, compared to net income of $69 million during the same period last year. Realogy also said revenue fell 25 percent to $1.2 billion.

In 2019, Realogy reduced its net debt by $78 million. CEO Ryan Schneider said at the time that selling Cartus meant the company was “divesting a non-core, very complex business.”


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