With its deal to buy RentPath off the table, CoStar doesn’t want to get stuck with the bill.
In a regulatory filing Monday, the data giant slammed RentPath’s attempt to collect a nearly $60 million break-up fee, arguing the listing portal was in breach of a purchase agreement.
The two sides struck a $585 million deal in February, when CoStar agreed to buy its rival out of bankruptcy. In November, federal regulators sued to block the sale, which they said would leave CoStar with too much power.
RentPath called off the deal on Dec. 29, citing the U.S. Federal Trade Commission’s opposition.
But in a preliminary complaint filed in Delaware bankruptcy court Monday, CoStar alleged RentPath engaged in a “scheme to undermine the transaction” by failing to support CoStar’s FTC strategy and by terminating the sale agreement in the middle of the regulatory battle.
In conjunction with the complaint, CoStar also filed an adversary proceeding, a separate lawsuit within the bankruptcy case.
Neither CoStar or RentPath immediately replied to requests for comment.
RentPath, which was acquired in 2011 by TPG Capital, owns Rent.com and ApartmentGuide.com, while CoStar operates Apartments.com, ApartmentFinder.com and ForRent.com.
The FTC said in its complaint that CoStar and RentPath’s long-standing rivalry kept prices low; a merger would consolidate Costar’s control over the marketplace.
In a statement last week, RentPath said its Chapter 11 plan remains backed by its lenders.
“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,” CEO Dhiren Fonseca said.
In a Dec. 29 bankruptcy court filing, however, RentPath asked for “expedited” payment of the break-up fee. It said CoStar had pursued a “win-win” strategy from the outset of the Chapter 11 proceeding: If CoStar wasn’t able to get regulatory approval for the deal, a lengthy FTC battle would put RentPath in a “materially weakened position” and unable to engage in costly litigation over the break-up fee.
CoStar — which has a market cap of $35 billion — has been aggressively pursuing a bigger slice of the residential sector. It has spent nearly $2 billion on acquisitions in recent years.
Even as it faced FTC scrutiny last year, CoStar paid $190 million for auction site Ten-X in June. In November, it struck a deal to buy Homesnap, a listing site for brokers, for $250 million.