Three days after the real estate juggernaut CoStar Group had sweetened its offer to take over the real estate data and analytics company CoreLogic, the latter came back with an answer: Not sweet enough.
On Monday, CoStar increased its previous all-stock offering for CoreLogic by $ 7 billion by $ 6 per share, or an additional $ 450 million, bringing CoreLogic shareholders to $ 6 in cash per share and $ 0. 1019 shares of CoStar Group common stock would be received in exchange for that portion of CoreLogic’s stock.
The value of the proposed package is roughly equivalent to $ 90 per share based on CoStar’s closing price on Feb. 26, or $ 97 per share based on its 30-day volume-weighted average price, the company said in a statement on Monday.
The revised offer came a month after CoreLogic agreed to be acquired by private equity firm Stone Point Capital and Insight Partners for $ 6 billion. In a letter to CoreLogic shareholders, Andy Florance, CEO of CoStar, said CoStar is “confident” that the CoreLogic Board of Directors see its revised offer under CoreLogic’s existing agreement with Stone Point Capital and Insight Partners as a “superior proposition” will.
In a letter Thursday, Frank Martell, President and CEO of CoreLogic, told Florance that the CoreLogic board had not concluded that CoStar’s revised offering qualified as a “superior proposition.”
“The CoreLogic Board unanimously believes that your updated proposal needs further improvement in relation to the following key areas: (i) value, (ii) value security, and (iii) security of closure,” wrote Martell.
“We continue to believe that the combination of our two businesses offers strategic potential and we ask you to reconsider your positions on these important terms.”
In terms of value and value retention, Martell pointed out that CoStar shares have declined approximately 19 percent, or $ 177 per share, since the company’s February 16 tender offer, and hence the company’s updated proposal as “a significantly lower total value per share “Represents. than the previous commandment.
“$ 6 per share in cash does not materially reduce the exposure of CoreLogic shareholders to the associated volatility of your stock,” said Martell. “The volatility and the course of the CoStar share price have led to increasing concerns about the security of value associated with the CoStar share, particularly in view of your proposed terms, which include an antitrust process of up to 15 months.”
Martell also noted that the updated proposal includes a termination date that CoStar can unilaterally extend to possibly one year after the expected closing date of the Stone Point and Insight contract in the second quarter.
“In light of this … we find that the time value of money at its reasonable cost of capital and the amount of time it takes to complete the transaction affects the present value of your updated offering,” said Martell.
He urged CoStar to reconsider its position and “deliver higher, safer value and as much money as possible”.
“We would like to reiterate that CoStar and the combined company would have sufficient capacity to fund all or much of the transaction in cash (with the potential for public stock offerings to fuel that capacity) and a substantial increase in the Cash Compensation Amount A transaction would improve the strength of your updated offering, ”said Martell.
On temporal security, Martell noted that Florance’s public statements that he believes “the deal has a very high level of security to close in a quick timeframe” and “simply do not have any significant antitrust concerns.” are inconsistent with the determination of the updated proposal would allow CoStar to extend the termination date for up to 15 months after signing in order to obtain antitrust approval from regulators.
“A 15 month external date exposes CoreLogic shareholders to unnecessary delays and risk, as well as the volatility of CoStar stock prices,” said Martell.
The Federal Trade Commission (FTC) recently suspended CoStar’s proposed acquisition of RentPath due to antitrust concerns, and CoStar is now required to pay RentPath a termination fee of $ 52 million.
During CoStar’s fourth quarter earnings call last week, Florance said the deal with CoreLogic is unlikely to attract antitrust authorities’ attention as the two companies currently serve “completely different markets” – although Florance hopes this will change .
“This combination would triple the CoStar Group’s total addressable market by combining the world’s leading provider of digitization real estate with a world-leading provider of digitization real estate for residential real estate,” said Florance during the conference call.
“We estimate that worldwide commercial real estate is valued at $ 66 trillion and residential real estate is valued at $ 114 trillion. Together, these companies will be very well positioned for growth and will meet the information analysis and marketing needs of the $ 180 trillion real estate industry worldwide. The global value of real estate is twice the value of all public companies combined. “
With the acquisition of CoreLogic, CoStar hopes to remove the man-made differences between digital commercial and residential real estate products that currently require customers interested in both to purchase different CoStar and CoreLogic products, according to Florance. CoStar would do this in part by offering several CoreLogic private products to commercial customers.
“We believe these integrated solutions will create massive cross-sell opportunities, dramatically increase sales with product ingestion, and generate hundreds of millions in sales synergies,” said Florance.
Martell concluded Thursday’s letter by stating that CoreLogic would send CoStar a revised merger agreement that “reflects important, limited clarifications” on the merger agreement that CoStar included in its updated proposal.
“We continue to appreciate your interest in the acquisition of CoreLogic and are committed to protecting and maximizing value for our shareholders,” said Martell. “Our feedback above is geared towards that goal and our board stands ready to meet again should you decide to revise your proposal to address these issues.”
In a press release accompanying the letter, CoreLogic stated that the merger agreement with Stone Point and Insight “remains in full effect” and that the CoreLogic board has not withdrawn or changed its recommendations that CoreLogic shareholders vote in favor of the deal Has.
CoStar did not immediately respond to an email request for comment from Inman. We will update this story when we hear something.
Email Andrea V. Brambila.
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