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US-based CoStar has raised its bid to acquire Australia's Domain Holdings to AUD 4.43 per share, valuing the deal at AUD 2.80 billion (USD 1.76 billion). Despite the increased offer, Domain's shares fell 4.7% amid investor concerns over valuation. The acquisition would mark CoStar's entry into the Australian market and could challenge dominant rival REA Group. Nine Entertainment, which owns 60% of Domain, supports the revised bid and could gain AUD 1.4 billion in proceeds. Domain's board has agreed to grant CoStar due diligence access. The deal could reshape the real estate classifieds sector, especially as market conditions improve with falling interest rates.
US-based property data giant CoStar has increased its bid for Australia's Domain Holdings, offering AUD 4.43 per share, raising the total valuation of the deal to AUD 2.80 billion (USD 1.76 billion). This revised offer represents a 5.5% premium over the company's initial bid of AUD 4.20 per share. Domain, the second-largest real estate classifieds company in Australia, disclosed the updated proposal in a statement, confirming that the offer was presented on a 'best and final' basis. Advertisement
Despite the improved bid, Domain's shares dropped by as much as 4.7% to AUD 4.26 per share, reaching their lowest point since February 24. Market analyst Grady Wulff of BellDirect suggested that investors may be selling off their shares because they either perceive the bid as undervaluing the company or are capitalizing on the stock's strong performance. With Domain's shares trading near a five-year high and its price-to-earnings (PE) ratio standing at approximately 51 times, some investors may be opting to secure profits rather than hold out for further developments.
If finalized, this acquisition would mark CoStar's first expansion into the Australian market. The deal is expected to significantly impact the local real estate classifieds sector, which has seen a downturn in listing volumes due to high living costs and a slowing housing market. However, with interest rates beginning to decline, market conditions are showing signs of improvement.
Domain has long played second fiddle to REA Group's realestate.com.au, the dominant player in the Australian property classifieds market. The latter is controlled by News Corp and has consistently maintained a larger market share. A successful acquisition by CoStar could potentially reshape competition within the sector and provide Domain with the financial backing needed to challenge REA Group more aggressively.
Additionally, this deal would deliver a substantial financial boost to Nine Entertainment, which owns a 60% stake in Domain. Nine, a major Australian media conglomerate with interests in newspapers and free-to-air television networks, stands to gain approximately AUD 1.4 billion in cash proceeds from the transaction. In a separate filing with the exchange, Nine Entertainment expressed its support for Domain's decision to engage with CoStar and grant due diligence access at the revised offer price.
Following the announcement, Nine Entertainment's shares also experienced a decline, slipping by as much as 1% to a one-week low of AUD 1.57. Meanwhile, Domain indicated that under the improved proposal, it might have the ability to declare a pre-completion special dividend.
With Domain's board unanimously deciding to proceed with discussions, CoStar's proposal is now under further evaluation, potentially setting the stage for a major shift in Australia's real estate classifieds industry.
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