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Brexit's Biggest Fanboys Make a Killing in Property

The Daily Mail owner’s sale of ZPG is opportune given the drop in London house prices.

Housing winner.

Photographer: Bryn Colton/Bloomberg

U.K. house prices fell the most in eight years in April. That hasn’t stopped the parent company of shouty British tabloid the Daily Mail securing a 14-fold return from the property industry.

Daily Mail & General Trust Plc says it will have pocketed 890 million pounds ($1.2 billion) from its 30 percent stake in ZPG Plc – owner of popular housing websites Zoopla and PrimeLocation – after its sale to Silicon Valley private equity firm Silver Lake Management Co.

DMGT says its proceeds from the 2.2 billion pound sale will be about 640 million pounds. The rest of the cash returns came from an IPO, plus dividends and the like since it first got involved with ZPG in 2004.

The timing is opportune. The London housing market is in the doldrums, not least because of the Daily Mail-inspired Brexit vote. ZPG will probably need to expand into new markets to maintain its impressive growth. 1 A private equity firm’s five-year investment horizon will at least allow it to pump money into expansion and acquisitions both in the U.K. and abroad.

Flat Shares

ZPG shares stagnated in line with the U.K. housing market in the past 12 months

Source: Bloomberg

It’s also no surprise that a Californian firm spies opportunity here. ZPG has vast pools of data on the housing market and buyer behavior, but its ability to squeeze the most value from that data is limited. Machine-learning techniques could, for instance, make it easier to identify why a property sells. Silver Lake wants to pair ZPG with Red Ventures, a North Carolina startup that specializes in big data analytics.

Pools of Money

Silver Lake's new $15 billion buyout fund has so far focused on tech and data investments

Source: Bloomberg

Note: Silver Lake Partners V LP was launched in 2017

It’s a strategy that’s gaining steam across the tech industry: rather than just gathering more data, companies are trying to extract more profit from what they have. Take Twitter Inc., whose sales jumped 21 percent in the most recent quarter even though user numbers rose just 1.8 percent.

While it has bought small tech companies such as Hometrack and Calcasa, ZPG’s data business makes up only 8 percent of its 245 million pounds of yearly revenue. Should the U.K. housing market fall further, the smart targeting of buyers will become essential.

Silver Lake is better placed to help than DMGT, ZPG’s biggest shareholder, which is having to put out fires in its own business. The British company’s shares fell 24 percent in November after it warned of weakness at most of its divisions, though they have recovered. It’s smart to cash out so handsomely before Brexit does even more damage to the U.K. housing market.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

  1. Revenue has jumped threefold since 2014.

To contact the author of this story:
Alex Webb at awebb25@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net

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