Property ManagementHomestore, Memberworks Settle Suit
Homestore (Nasdaq: HOMS)
today announced that it has reached a definitive settlement in the lawsuit commenced by Memberworks, Inc. in March 2002, regarding Homestore’s purchase of iPlace, Inc., former parent company of ConsumerInfo.com.
Homestore completed the sale of ConsumerInfo.com to Experian in April 2002 for $130 million in cash. Homestore had purchased ConsumerInfo.com as part of the acquisition of iPlace in August 2001. In its lawsuit, Memberworks, the former majority stakeholder of iPlace, had requested an injunction against the consummation of the transaction, which was denied. However, a judge ruled that $58 million of the $130 million of proceeds from the sale of ConsumerInfo.com be placed in a constructive trust pending the outcome of litigation.
As part of the settlement agreement announced today, Homestore will receive $35 million of unrestricted cash from the constructive trust. Memberworks and certain other former iPlace shareholders will receive $23 million as settlement of its claims and Memberworks has agreed to file a voluntary dismissal of the lawsuit.
Homestore has recorded a $23 million liability and a charge to its operating results in its second quarter results, which will be filed later today. In the third quarter, the company will record a $58 million reduction in restricted cash as well as a $35 million increase in cash and cash equivalents. At June 30, 2002, Homestore had $64.9 million in cash and cash equivalents available to fund operations, in addition to $151.2 million in restricted cash.
“We determined that an expedited settlement of this case was in the interest of Homestore’s customers, employees, and shareholders. By increasing liquidity and resolving disputes unrelated to ongoing operations, Homestore is further able to enhance focus on its mission of helping real estate professionals become more productive and profitable,” said Mike Long, Homestore’s Chief Executive Officer.