Shares of CoStar Group Inc. (NASDAQ: CSGP) touched a new life-time high of $66.09 on Thursday, while LoopNet Inc. (NASDAQ: LOOP) touched a new 52-week high of $18.55. CoStar, an information service provider to REITs, said it has agreed to buy LoopNet for about $860 million in cash and stock, to double its paid subscriber base.
The Bethesda, Maryland-headquartered CoStar said LoopNet shareholders will receive $16.50 in cash and 0.03702 shares of CoStar common stock for each share of LoopNet common stock, representing a total equity value of about $860 million and an enterprise value of $762 million. The transaction represents a premium of 31 percent to LoopNet's closing price on April 26.
The San Francisco, California-headquartered LoopNet is a commercial real estate information services provider and operates LoopNet.com, which is a commercial real estate listing service with over 4 million members.
The commercial real estate market is one of the largest asset classes in the United States with over $11 trillion in value and the potential size of the industry providing marketing and information services to commercial real estate professionals is about $30 billion, according to CoStar.
Based upon the first quarter of 2011, the combined companies have annualized revenue of about $321 million. LoopNet equity holders will own about 8.5 percent of CoStar shares outstanding on a fully diluted basis, following completion of the transaction.
"CoStar and LoopNet truly bring together Wall Street and Main Street. We expect the scale, complementary service capabilities and diversified client and geographic footprint created by the combination of CoStar and LoopNet will drive significant revenue opportunities and cost saving synergies," said Andrew Florance, President and Chief Executive Officer of CoStar.
CoStar has received a commitment letter from J.P. Morgan for a fully committed term loan of $415 million and a $50 million revolving credit facility, of which $37.5 million are committed, which will be available to fund the acquisition and the ongoing working capital needs of CoStar and its subsidiaries following the transaction.
CoStar expects this transaction to be accretive to adjusted earnings per diluted share in 2012 and expects annual cost synergies of $20 million achieved over the first 24 months following the close of the transaction.
CoStar sees the potential for significant revenue synergies through the cross-selling of each company's complementary services to the other's client bases.
J.P. Morgan acted as CoStar's financial advisor, and Simpson Thacher & Bartlett LLP acted as legal counsel to CoStar. Evercore Partners, L.L.C. acted as LoopNet's financial advisor, and Davis Polk & Wardwell LLP acted as legal counsel to LoopNet.
CoStar Group stock gapped open sharply lower April 28 at $61.00 compared to previous day's close of $61.38. But, the stock reached a new all-time high of $66.09 on Thursday. The stock closed Thursday's regular trading up 5.98 percent at $65.05 on the NASDAQ Stock Market with a volume of 1.43 million shares. The stock has grown from $7.625 on Oct. 2, 1998 to $65.05 on April 28, 2011. The stock traded between $37.50 and $66.09 during the past 52 weeks.
LoopNet stock gapped open sharply higher April 28 at $18.04 compared to previous day's close of $14.37. The stock reached a new yearly high of $18.55 on Thursday. The stock closed Thursday's regular trading up 28.11 percent at $18.41 on the NASDAQ Stock Market with a record volume of 11.31 million shares. The stock has grown from $11.28 on April 29, 2010 to $18.41 on April 28, 2011. The stock traded between $8.50 and $18.55 during the past 52 weeks.