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Domain Holdings (ASX:DHG) has given CoStar – the company offering to buy it at a 40% premium – a month-long exclusive due diligence period.
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The news, Domain was sure to note on Monday, does not reflect a guarantee the deal will go ahead. But if Domain feels it’s not being ripped off, its directors intend to vote in favour of the deal, and they’ll suggest others do the same. (Read: Retail shareholders.)
That probably won’t be a tough sell for many of Domain’s retail holders though. Nor is it likely to scare off any high net worth or institutional entities.
While shares were down -1.16% in the second hour of Monday morning trades, Domain has retained its +30% 1Y returns following a meteoric share price hike following CoStar’s proposition on February 21.
There it has largely remained, give or take intraday volatility – but it’s clear the Australian market is fully expecting this deal to go ahead.
Under the DD period, CoStar can do what it wants in a ‘virtual data room’ assessing Domain’s books, while Doman is going to an “independent expert” to validate the deal.
If that expert says it’s fine, if Domain doesn’t feel CoStar has changed the goalposts around the deal, and if everyone (on Domain’s end) “continues” to agree the deal is good value, then things are looking pretty good.
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Unless, of course, someone apart from CoStar comes along and makes a better offer in the meantime. But a 40% premium for a company that has long struggled to perform quite as well as Murdoch-backed REA seems pretty hard to beat for most investors, thus the retention of gains.
DHG last traded at $4.28/sh.
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