US giant CoStar makes $2.6b play for Nine’s Domain Holdings

A $52 billion US property data giant has lobbed a firecracker into the heart of Australia’s online home sales market with a multibillion-dollar pitch to buy out all of Nine Entertainment-controlled Domain Group.

In a deal that could potentially shake-up rival REA Group’s dominance of the space with its far more popular realestate.com.au portal, Domain revealed on Friday it had received an unsolicited cash takeover offer from Nasdaq-listed CoStar.

The cash offer was priced at $4.20 a share — a 34.6 per cent premium to, and more than $1 higher than, Thursday’s closing price — that values the target at about $2.6 billion.

Shares in Domain soared more than 40 per cent, pushing it higher than CoStar’s bid price to $4.37. Nine’s shares added 20.1 per cent to $1.73.

Shares in $35.7b News Corporation-backed REA Group plunged more than 11 per cent to $236.18.

CoStar snapped up 19.9 per cent of Domain’s shares on Thursday at its bid price. The company, which bills itself as a real estate analytics firm, recently bought out Matterport, a 3D spatial mapping platform for the real estate sector, for $2.5b.

It has a history of acquisitions, including buying UK property portal OnTheMarket for £100 million ($198m) and bidding for News Corp’s Move in 2023.

While CoStar has previously focused on Europe for expansion, recent comments from chief executive Andy Florance suggested Australia was now firmly on its radar.

In a brief statement to investors, Domain’s board said it was assessing the offer and would appoint advisers to “assist in this process”.

Nine also issued a short statement following news of the bid, and hinted it could be fishing for a higher bid.

“Domain is of strategic importance to Nine’s media ecosystem and our long-term growth strategy,” it said.

“Nine will consider the proposal with a focus on the best interests of Nine shareholders.”

While it would pocket more than $1.5b from the takeover, a deal with Nine may hinge on any involvement or partnership and content-sharing arrangement Domain could retain with the media group.

The bid comes amid a change of management for Domain. Greg Ellis was last week appointed interim chief executive for up to 12 months as the board continues the search for a permanent replacement following the exit of Jason Pellegrino.

The former head of Google’s Australian operations, Mr Pellegrino had led Domain for six years but agreed to a leadership transition process in October last year.

Domain last week reported a 28.3 per cent rise in net profit for the first half to $33.1 million, with revenue 7.4 per cent stronger than a year before at $217.2m.

“We are strengthening our collaboration with Nine, with significant cross platform branding opportunities during the recent Australian Open,” Mr Pellegrino said in a statement outlining the results.

“We have also leveraged the power of Nine in the launch of a Victorian edition of Prestige magazine.

“And finally, we are progressing our investment into our technology platforms to accelerate the Marketplace journey, and broaden the range of Only on Domain experiences available to our users. At the same time, we are achieving productivity gains to offset this increased investment.”