US property giant makes $2.7b bid for Domain

Nine Entertainment-owned Domain has received a $2.7 billion takeover offer from US property giant CoStar, which picked up a 16.9 per cent stake in a lightning raid on the digital real estate business on Thursday night.

Nine, the owner of The Sydney Morning Herald, Age and The Australian Financial Review, has a 60 per cent stake in Domain, and the bid for the business comes as it conducts a strategic review of its overall operations.

A sale of Domain would mean a big shake-up of the real estate classifieds market.Credit: Dion Georgopoulos

Shares in Nine and Domain rocketed on Friday. Nine jumped 20.1 per cent to $1.73, while Domain surged 40 per cent to $4.37.

Domain told the ASX it had received an unsolicited, non-binding indicative proposal for all of its shares at $4.20 each, compared to a closing share price of $3.12, giving it a market cap of $1.97 billion.

CoStar confirmed to Domain that it has financing in place for the offer, but it will still require approval by the Foreign Investment Review Board (FIRB).

Nasdaq-listed CoStar, which is valued at $US32.5 billion ($51 billion), provides commercial real estate data to investors, property managers and the real estate industry.

It also operates a number of listing platforms, including CoStar, LoopNet, Apartments.com, and Ten-X.

Domain said an assessment of CoStar’s proposal had commenced and that advisers would be appointed.

Nine, which will ultimately determine the fate of the bid, offered a cautious acknowledgement of the CoStar proposal.

“Domain is of strategic importance to Nine’s media ecosystem and our long-term growth strategy. Nine will consider the proposal with a focus on the best interests of Nine shareholders,” a spokesperson said.

The news of CoStar’s share raid was first reported in the Financial Review’s Street Talk section, which noted that Macquarie Capital had bought shares on behalf of the US company at $4.20 a share.

A potential sale would mark a significant shake-up of the local real estate classifieds market, which has largely been dominated by the News Corp-owned REA Group, with Domain coming in a distant second.

CoStar’s interest also offers Nine an opportunity to test the waters on whether it’s worth rebalancing its portfolio of assets, which includes publishing, broadcast, streaming and radio businesses.

In January, acting Nine chief executive Matt Stanton announced a restructure that included a new marketplaces division, led by chief digital officer Alex Parsons, aimed at getting better returns from Domain and Drive.

“The creation of a marketplaces division will provide greater focus on Domain and Drive, ensuring we capitalise on value-creation opportunities across the group,” Stanton said at the time.

CoStar owns a number of real estate platforms around the globe. Credit: Bloomberg

Domain is just the latest target for an acquisitive CoStar which acquired UK portal OnTheMarket in 2023 for £100 million ($198 million), and is about to buy 3D mapping group Matterport for $US1.6 billion ($2.5 billion) next month.

E&P Capital said a successful offer at this price would provide a bonanza for Domain’s main shareholder Nine, which would receive more than $1.5 billion in cash from the deal. It would also boost Nine’s market value.

“Assuming we valued Domain at $4.20 a share (up from $3 currently), our valuation for Nine would increase to $1.60 a share, up from $1.30 currently,” E&P’s Entcho Raykovski said.

Domain lost its chief executive, Jason Pellegrino, in October and is yet to appoint a permanent replacement. Earlier this month, Domain said board member and former REA boss Greg Ellis would serve as interim chief executive.

The takeover target this month posted a 7.4 per cent jump in revenue to $217.2 million for the first half of fiscal 2025, just short of analysts’ expectation of $220.5 million. Core earnings for the period landed at a better-than-expected $77.8 million.

With Clancy Yeates

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