CoStar in takeover attempt for Domain Group, Macquarie tapped

Domain Group is the number two player in the online real estate market behind REA Group. Picture: iStock.

US online real estate powerhouse CoStar was moving in on Domain Group through a share market raid on Thursday night before launching a $2.65bn takeover proposal for Australia’s second largest market player.

Macquarie Securities was working to buy up to 10 per cent of the stock after the market had closed on Thursday for the strategic buyer.

It has already bought 7.5 per cent, outlaying $265m in total on its holding, and a term sheet sent to investors said the acquirer intended to submit a non-binding indicative offer to acquire all the shares of Domain for $4.20 each, valuing a buyout at $2.65bn.

The $US32bn CoStar is based in the US and has had aspirations for global expansion.

Shares were being purchased at $4.20 per share, a 34.6 per cent premium to Domain’s closing price on February 20 and the same price it already bought shares at.

The online real estate group Domain is 60 per cent owned by Nine Entertainment and is known to have been seeking a strategic buyer of a stake in the business as the company remains in the midst of a management change.

Domain Group is the number two player in the online real estate market in Australia behind REA Group.

CoStar has been in search of opportunities in Australia of late, with earlier suggestions it was looking at Domain.

DataRoom reported last week that the $1.8bn Domain Group was said to have been shopped to private equity firms far and wide to test their interest in taking a stake in the business after its performance has lagged its major News Corp-majority owned rival REA in the past year, but none were interested.

TPG Capital has looked, as is the case with John Whylie’s Tanarra, a Nine Entertainment shareholder.

Kohlberg Kravis Roberts has previously considered a buyout of Domain Group but later walked away.

The raid comes as the company is yet to appoint a chief executive, while its major shareholder Nine still has acting boss Matt Stanton running the business with no chief executive named.

Greg Ellis, the former boss of Domain’s rival REA Group, has been appointed in the interim to lead Domain Group, replacing Jason Pellegrino, while a search for a permanent chief executive remains on foot.  

On Thursday last week, Domain delivered a 46 per cent lift in its net profit for the first six months of the financial year to $35.7m on the back of continued listings growth as it strengthens its collaboration with Nine, the free-to-air ­broadcaster and publisher of The Age, The Sydney Morning Herald and The Australian Financial Review.

Assisting with matters related to Domain is Nine’s house investment bank Jefferies, which is said to have been testing a partial privatisation that would take Domain off the listed market to boost performance behind closed doors, without scrutiny.

The Nasdaq listed CoStar Group is an American provider of information, analytics and marketing services to the commercial property industry in North America and Europe, founded by Andrew Florance in the 1980s. Mr Florence remains president and chief executive officer of the group.

CoStar has several online databases including Apartments.com and Homes.com – the second largest residential real estate marketplace in the US, with an audience of 110 million average monthly unique visitors. Annually, the group counts around 3 billion visits across its network of brands.

CoStar employs around 6550 staff in 13 countries.

Earlier this week, it reported annual revenue of $US2.74bn, up 11 per cent, but net income of $US139m was down 62 per cent from a year earlier.

Its current market capitalisation is around $US29bn.

The group also has an aggressive, multi-year branding push underway in the US, which it kicked off with Super Bowl advertisements earlier this year.