Australia’s second-biggest real estate platform, Domain Holdings (ASX: DHG) looks destined to leave the ASX following revelations today that US$50 billion United States property giant CoStar lobbed in a bid to take the Nine Entertainment (ASX: NEC) controlled Australian property listing business out.
A week after buying a 17% stake in Domain Holdings (ASX: DHG), Nasdaq-listed CoStar has made a non-binding indicative $2.7 billion offer which the board said will require approval from the Foreign Investment Review Board if endorsed.
“There is no certainty that the proposal will result in a transaction. Domain will appoint advisers to assist in this process,” Domain said in a statement today.
“The Domain board has commenced an assessment of CoStar’s proposal.”
Today’s bid follows shareholder pressure on Nine Entertainment, which controls 60% of Domain, to turn around the dismal performing ASX-listed property business, which has underperformed relative to its larger peer REA Group, which has the backing of News Corporation (ASX: NWS).
Given that Nine has previously contemplated selling its stake, or taking Domain private, today’s bid may prove an attractive option.
Domain is currently trading close to half its five-year high of around $6 a share in November 2021.
Broker E&P has noted that every 10¢ increase in the valuation of Domain is worth 3¢ around a share to Nine.
It’s understood that Macquarie Capital bought shares of CoStar last week at $4.20 a share in Domain, which closed at $3.12 yesterday.
The price paid by CoStar values the business at $2.7 billion, exceeding its market capitalisation of $1.9 billion.
A term sheet sent to fund managers after-market on Thursday noted Macquarie’s client already owned 7.5% of Domain and wanted more.
This is not the first time CoStar has been on the acquisition trail.
Two years ago CoStar made a failed $5 billion bid to buy Move from News. However, it did manage to buy UK portal OnTheMarket in October 2023 for about $200 million and 3D property mapping service Matterport for $2.5 billion last year.
Today’s bombshell takeover announcement follows the appointment of Greg Ellis former CEO of its number one competitor, REA Group as interim CEO for 12 months.
Ellis replaces outgoing CEO and managing director Jason Pellegrino, who last October announced he would step down after six years leading the real estate business.
Domain’s earnings rose 14% to $77.8 million in the six months to 31 December. Profit rose 28% to $33.1 million as more people visited its real estate listing platform.
Domain has a market cap of $1.9 billion; the share price is down 1.2% in 12 months and up 23% year to date.
DHG appears to be in a medium-term rally confirmed by multiple indicators. Most importantly, the 5-day moving average is above both the 20 and 50-day moving averages.
Consensus is Hold.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
