Investment bank UBS has been hired by online real estate company Domain Group, which is yet to accept or reject last week’s $2.65bn buyout proposal from industry giant CoStar.
Domain, which is 60 per cent owned by Nine Entertainment, confirmed on Friday it had received a buyout proposal from US online real estate group CoStar to acquire the business for $4.20 per share and was assessing the offer.
It left the company scrambling to find an adviser and on the back foot at a time when Nine and Domain Group are both without permanent chief executives.
CoStar has used Macquarie Capital to gain a 17 per cent stake in Domain. Nine Entertainment counts Jefferies as its house banker.
Shares on Monday closed down 1c to $4.36, with the market betting CoStar will sweeten the deal.
The US-based group, run by founder Andrew Florance, dominates the online commercial real estate market globally but is working to lift its performance in residential online real estate.
It has been on an acquisition spree in recent years, buying companies which do not have the largest market shares in the countries where they operate, embarking on aggressive marketing campaigns to boost performance.
CoStar owns the number three player in the UK, OnTheMarket, and the number two player in the US, Homes.com, which the company has outlaid $US1bn on in marketing costs to boost its market share.
Sources believe Nine may hold out for a price closer to $4.50 per share and that major shareholder, Bruce Gordon with almost 25 per cent, is keen to back a Domain Group sale.
REA Group is 61 per cent owned by News Corp, publisher of The Australian, and analysts estimate it has about 75 per cent of the market share in Australia.
When Domain listed in 2017, it had 30 per cent market share and its market value was $1.6bn, while REA was worth $10bn.
Now REA has a $31bn market value and Domain $1.8bn, with Domain having margins of about 36 per cent (and REA over 70 per cent) as it has struggled to outpace its major rival.
Sales of stakes in businesses usually trigger capital gains tax payments, but market experts say Nine may have some capital gains tax losses to offset those tax obligations.
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