CoStar Submits All-Cash $1.7 Billion Takeover Bid for Domain

The U.S. real estate giant CoStar has made an all-cash offer to purchase the Australian number two portal Domain, worth A$2.7 billion ($1.72 billion U.S.).

Speculation persisted yesterday that CoStar was preparing its bid and Domain confirmed it has received an offer in a filing to the Australian Securities Exchange, saying:

Domain said it had received an unsolicited, non-binding indicative proposal from CoStar Group to acquire 100% of Domain’s issued capital by way of a scheme arrangement.

CoStar has stated that its proposed price of AUD4.20 per share will be offered to all Domain shareholders entirely in cash.

CoStar ambushed Domain earlier this week by purchasing a 16.9% stake in the Australian portal in a bid to force Domain's majority owner, Nine Entertainment (60%) to come to the table.

Trading volumes of Domain stock soared to over 107 million on February 20, all but guaranteeing an imminent takeover bid. By comparison, just 1.2 million shares were traded on February 19.

A term sheet seen by Reuters, one of the first outlets to announce the shock takeover bid, declared that an unnamed buyer intended to make a bid for the whole of Domain at A$4.20 per share, a price that would represent a 34.6% premium on Domain’s last closing price of A$3.12. Less than 24 hours later, that is exactly what has happened.

CoStar has already laid its cards on the table, saying the deal is conditional:

[There must be] no material adverse change to the business, assets (including any material asset acquisition or divestment), capital structure, affairs, prospects or financial performance of Domain.

The deal must also receive unanimous approval of Domain’s board of directors, CoStar caveated.

The news has already given Domain’s stock a boost, with shares closing at A$3.12 on Thursday up from A$2.92 a week ago and up 23.3% year-to-date.

Meanwhile, Nine's shares jumped more than 20% on Domain’s announcement, and Domain shares soared up to 40%.

Nine is already on the record saying "Domain is of strategic importance to Nine’s media ecosystem and our long-term growth strategy."

Yet Nine's media empire including radio, television and streaming services, does not exactly match the real estate classifieds space. Given a similar breakup of the Axel Springer media and classifieds business late last year, Nine has a perfect opportunity to cash out of an underperforming real estate asset and focus entirely on its mass media business. Nine is likely to face significant pressure to accept CoStar's bid.

Meanwhile, the takeover could set the stage for a major shift in Australia’s real estate portal landscape.

Last week, Domain reported its half-year results for FY25, posting revenue growth of 7% to A$217 million and EBITDA growth of 14% to A$77.8 million.

While Domain is a profitable and growing number two player, the market judges its performance relative to that of its major competitor, REA Group, the News Corp-owned operator of the leading Realestate.com.au portal.

News Corp and CoStar are already well acquainted as competitors in the U.S. market where the former runs Realtor.com which has been locked in an intense war of words with CoStar-owned Homes.com over for eighteen months.

The prospect of the two giant corporations locking horns in the lucrative Australian real estate market is a tantalising prospect for industry observers.