CoStar locks in $3B bid for Domain

Domain Holdings (ASX:DHG) has locked in its existing takeover offer from CoStar with a deed now ticked off by both parties for a buyout at $4.43/sh to holders.

While early news of the deal saw Domain soar to the $4 range, if you look at the company’s share price up to 20 February of this year, the $4.43 offer stands at nearly 60% premium. (Using a three month value weighted average.)

In short, CoStar sees Domain as undervalued, and, unable to fully take off. Compare Domain to competitor REA Group, which boasts a share price over $220/sh. The offer for domain is an implied A$3B, compared to REA’s market cap of $31B.

A further fully franked special dividend of 10cps may be paid out to shareholders subject to availability of franking credits.

“The Domain Board unanimously recommends that Domain shareholders vote in favour of the Scheme, in the absence of a superior proposal and subject to an Independent Expert concluding (and continuing to conclude) that the Scheme is in the best interests of Domain Shareholders,” the company wrote on Friday.

What matters most of all is whether or not Nine – as in the TV station – votes in support of the deal, which it intends to. Domain, owned by the media brand, is effectively why websites under that masthead run so many property-based articles.

The media presence surrounding Domain may or may not waver after CoStar’s buyout, something I’ve written up before.

“The Domain Board has carefully considered the CoStar proposal and believes it represents compelling value and a high degree of certainty for Domain shareholders, through the cash offer and limited conditionality,” Chair Nick Falloon added.

DHG last traded at $4.35/sh.

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