Domain Holdings Australia Ltd (ASX: DHG) shares are roaring higher on Friday morning.
In early trade, the property listings company's shares were up over 50% to $4.76.
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Why are Domain shares roaring higher?
Investors have been bidding the company's shares higher today after it confirmed that it has received a takeover approach.
According to the release, the company has received an unsolicited, non-binding indicative proposal from CoStar Group, Inc. (NASDAQ: CSGP) to acquire 100% of its issued capital by way of scheme of arrangement.
CoStar is US$32 billion Nasdaq-listed provider of online real estate marketplaces, information and analytics. It owns and operates residential and commercial marketplaces in the United States.
The release reveals that CoStar Group has made an offer of $4.20 cash per share, which represents a sizeable 34.6% premium to its last close price.
Though, as with most transactions, the proposed price will be adjusted for any dividends declared or paid by Domain prior to completion of the proposed transaction. However, this does not include the 2 cents per share dividend that was announced with its half year results last week.
While this offer values Domain at a cool $2.7 billion, it is still well short of the market capitalisation when its shares were trading at around $6.00 back in 2021.
CoStar has advised Domain that it acquired 16.9% of its ordinary shares on 20 February 2025 at $4.20 per share. Clearly it is very serious with its offer.
What's next?
The release notes that implementation of CoStar's proposal is conditional on the two parties entering into an agreed scheme implementation agreement (SIA) on customary terms.
CoStar has stated that its entry into an SIA is subject to the following conditions:
there being no material adverse change to the business, assets (including any material asset acquisition or divestment), capital structure, affairs, prospects or financial performance of Domain; the satisfactory completion of confirmatory due diligence in respect of which it has requested exclusivity; unanimous approval of the Board of Directors of Domain; final internal Co-Star approvals to enter into the SIA; and execution of satisfactory binding transaction documents.
In addition, CoStar's expectation is that the agreement would be conditional on approval from the Foreign Investment Review Board (FIRB), but it does not need a financing condition.
Domain response
The Domain board advised that it has commenced an assessment of CoStar's proposal.
For now, shareholders do not need to take any action in relation to the proposal. It also warned that there is no certainty that the proposal will result in a transaction.
The REA Group (ASX: REA) share price is sinking on the news. It was down over 13% to $230.96 at one stage. There may be concerns that CoStar could fund an aggressive growth strategy for Domain and threaten REA's domination of the market.
