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A little more than two months after purchasing a 17 percent stake in Australian real estate classifieds firm Domain, CoStar Group has entered a definitive agreement to purchase the firm for $1.9 billion.
CoStar Group, with the help of Macquarie Capital, spent $285 million on the 17 percent stake, which shakes out to $2.70 per share based on current AUD to USD conversion rates. CoStar will purchase the remaining Domain shares for $2.85 per share, totaling $1.5 billion. Domain shareholders, the Courts, and the Australian Government’s Foreign Investment Review Board still need to approve the deal, which is slated to close late August.
Andy Florance | Credit: CoStar Group
“We’re pleased to have reached an agreement with Domain and to see [owner Nine Entertainment]’s support of this transformative transaction,” CoStar Group founder and CEO Andy Florance said in a written statement. “As one of the first and most experienced digital real estate companies in the world, CoStar Group brings a proven track record of building high-traffic online marketplaces that deliver real value.”
“With our technology, scale and the innovation we’re known for, we see a tremendous opportunity to enhance the Australian property market,” he added. “By combining Domain’s deep expertise with our global experience and best practices, we will build a more compelling user experience at a lower cost — driving greater value for agents, vendors and homebuyers. We will also create value for our customers globally by incorporating Domain’s learnings and best practices into our marketplaces outside of Australia. We are confident this acquisition will foster more competition in Australia.”
The Virginia-based behemoth’s acquisition of Domain, if approved, would add another layer to its ongoing rivalry with News Corp, which owns Domain competitor REA Group, real estate listing company Move, Inc., and its subsidiary, Realtor.com.
Domain is the second-largest real estate classifieds firm in Australia, next to REA Group. Domain’s latest earnings results, which account for six months instead of three per Australian reporting standards, logged a 7 percent increase in revenue to AUD 217.2 million (or USD 139.4 million). Domain’s owner, Nine Entertainment, said the platform reaches an average of 6.6 million visitors each month.
Domain’s digital businesses, which include advertising solutions and three real estate print magazines, were flat for the half-year.
Meanwhile, REA Group saw third-quarter revenue rise 6 percent year over year to $271 million. REA Group’s Australian site, realestate.com.au, reached 12.3 million average monthly unique visitors during the quarter.
Domain Chair and Non-Executive Director Nick Falloon said CoStar is the company to help Domain “further realize” its potential, as its current owner embarks on a massive restructuring of the company’s executive board and divisions to save AUD 100 million over the next two years. Nine reduced its divisions to streaming and broadcast, publishing and marketplaces, the latter of which includes Domain and automotive content platform Drive.
Nick Falloon | Credit: Nine Entertainment
“The Domain Board has carefully considered the CoStar Group proposal and believes it represents compelling value and a high degree of certainty for Domain shareholders, through the cash offer and limited conditionality,” he said in a prepared statement on Friday. “This proposal reinforces the strong fundamentals of Domain, which we are confident will be further realized with CoStar Group’s support.”
In CoStar’s first-quarter earnings on April 29, Florance expressed his excitement about acquiring Domain while noting that CoStar will be able to leverage the best parts of Domain, OnTheMarket and Homes.com to bolster each site’s performance. This move could help CoStar tighten its Homes.com marketing spend, as its newly formed Capital Allocation Committee calls on the company to seek additional cost savings.
“One element from Domain that will benefit Homes.com and OnTheMarket is depth advertising, similar to signature ads for Apartments.com and LoopNet,” he said. “Domain offers four tiers of advertising that offer increasing levels of exposure as you move up their ad tiers by utilizing sort order, larger search placards, and social application retargeting. We will be adopting the best practices of Domain in the U.S. and the United Kingdom.”
“We see numerous opportunities to create additional value for Domain following the potential acquisition,” he said. “… We will bring what we built with Homes.com to Australia and the United Kingdom and win over consumers. Domain is also a strong entry point into Australia’s commercial real estate market.”
