Andrew Bary

Douglas Elliman stock rose 35% Friday after Bloomberg reported the high-end residential real estate broker has received a takeover offer from the larger Anywhere Real Estate for more than $4 a share.

Douglas Elliman stock ended at $2.90 after touching a 52-week high of $3.20 earlier in the session. Both Douglas Elliman and Anywhere, formerly Realogy, declined to comment to Barron's on what each called "market speculation." Shares of Anywhere Real Estate stock climbed 3.7% to $3.34 apiece on Friday.

Douglas Elliman appeared to be trading below the reported takeover price in part because no bid has been made public.

If Anywhere does make a bid for the company, a takeover battle could develop because Douglas Elliman has a bite-sized market value of just $360 million, including common shares that would be issued in conversion of a $50 million debt issue. It has a strong balance sheet, with over $130 million in cash and no debt other than the $50 million convertible bond. Its revenues are running at about $1 billion annually. Anywhere, which owns Corcoran, Sotheby's and Century 21, has annual revenues of around $6 billion.

Douglas Elliman has a much lower market capitalization than industry leader Compass, whose market cap is more than $3 billion. Anywhere has a similar market value as Douglas Elliman, but has substantial debt of around $2.5 billion. That could make a deal with Anywhere less appealing for Douglas Elliman.

"I would expect that the Douglas Elliman board is forming a special committee to evaluate strategic alternatives as we speak," said Bradley Tirpak, a sizable shareholder in Douglas Elliman. "My expectation is that they will do the right thing for shareholders." Tirpak spoke to Barron's on Friday.

Founded more than a century ago, Douglas Elliman is the No. 5 real- estate broker in the country, and one of the top brokers in the high-end market. The firm is a leading broker in such markets as Manhattan, Long Island (including the Hamptons), Aspen; and South Florida, including Palm Beach.

Potential bidders for Douglas Elliman include Compass, Berkshire Hathaway (which owns a large residential real estate business), and Savills, a U.K.-based international high-end real estate-broker and services firm. Douglas Elliman also could appeal to private equity, including Blackstone and Brookfield, both of which have big real estate investment arms.

A key shareholder is Kennedy Lewis. The investment firm holds a $50 million convertible bond that can be exchanged for about 30 million shares of Douglas Elliman stock, or about 25% of the pro-forma share count of about 120 million shares, Barron's estimates. Kennedy Lewis declined to comment.

Douglas Elliman's shares had fallen sharply from about $10 a share since it was spun off from Vector Group at the end of 2021.

The stock has been depressed by losses in recent years, but the company had a solid first quarter with higher revenues and sales volume, as well as positive cash flow as measured by adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda.

Douglas Elliman's new CEO since last October, Michael Liebowitz, has sought to reduce expenses, add related services, and move the company to consistent profitability.

Tirpak termed the first-quarter results "excellent" as revenues rose over 25% and commission splits with the firm's brokers improved for the company.

Barron's highlighted the company's appeal in an article last November, in which we argued that the company was valued for a pittance with a great balance sheet and that investors could win in three ways: higher profits, a more active real estate market, or a takeover. The stock traded then around $1.90.

Even with the stock's rally, Douglas Elliman remains a bite-sized potential acquisition. Now that the company appears to be in play, there could be interest from several potential bidders -- and that could mean upside in the stock from current levels.

Write to Andrew Bary at andrew.bary@barrons.com

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May 23, 2025 17:04 ET (21:04 GMT)

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