US suitor CoStar ups bid for Nine Entertainment-controlled Domain to $2.8b

The US property market analytics giant circling Australia’s Domain has sweetened its offer to almost $2.8 billion, prompting the real estate listings platform to open its books.

Domain told investors on Thursday that CoStar had returned to add another 23¢ to last month’s initial $4.20-a-share cash offer — lifting the value of the deal from $2.7b to $279b.

It said the “best and final” offer could also delver shareholders a franking credit provision of up to 4¢ a share and it would now engage with CoStar towards due diligence.

CoStar already holds almost 17 per cent of Domain’s stock.

Domain’s controlling shareholder Nine Entertainment said “with a focus on the best interests of Nine shareholders” it supported Domain’s decision to grant CoStar due diligence.

Nine said the improved offer could deliver it after-tax cash proceeds of about $1.4b.

The higher bid comes just days after the broadcaster and publisher revealed it was in talks with CoStar to sell its 60 per cent stake.

Nine owns the Nine free-to-air TV network, newspapers including The Age and Australian Financial Review, and radio stations such as Sydney’s 2GB and Melbourne’s 3AW.

But Domain — Australia’s second-biggest online real estate listings website behind REA Group’s realestate.com.au — has become an increasingly important source of revenue as traditional media advertising declines.

The cash generation from Domain overtook Nine’s publishing arm in the December half-year as the group’s second-biggest earner after the television division.

Its profit rose 14 per cent to $77.8 million before interest, tax, depreciation and amortisation and now accounts for 29 per cent of group earnings. Domain’s revenue was 7 per cent better at $217.2m.

In contrast, Nine’s group underlying earnings were 15 per cent lower at $268.4m on flat revenue of $1.39b. The group also announced a additional $100m would be trimmed from costs.

Domain said the new offer from CoStar represented a 42 per cent premium to its closing price on the day before CoStar’s first bid on February 21.

It said there was no guarantee that a binding agreement will be reached and no certainty that the improved proposal would result in a deal.

CoStar’s proposal extends a global wave of consolidation and attempted takeovers in the property sector as borrowing costs around the world start to fall.

REA Group made several ill-fated offers for the UK’s Rightmove last year.