Domain received a juicy acquisition offer from Costar, a US-based property platform - with a 36% premium to its previous closing price.
👉 Background: Domain is the online property platform that lists houses for sale, rent and even research. For a number of years, Domain has been playing second-fiddle to the big dog: Realestate.com.au, which received more than 10.8 million monthly unique viewers last year compared to Domain's 7.4 million. This performance gap isn't just in eyeballs, but also stock price where Domain’s share price has been lagging behind.
👉 What happened: In February this year, Domain received a juicy acquisition offer from Costar, a US-based property platform - with a 36% premium to its previous closing price. But Domain's board played hard to get and asked CoStar to sweeten the deal. So now, CoStar has made their “best and final” offer, which is 42% higher than Domain’s closing price (prior to the first offer).
👉 What else: Given Nine Entertainment owns more than 60% of Domain Group, it will be the ultimate decider of whether this deal goes ahead. But, with Nine’s own business in a decline, letting go of Domain could create an existential crisis for this declining business.
What's the key learning?
💡Selling off one of your highest-growth assets might pad your balance sheet today, but it can shrink your future. Selling Domain will give Nine a very juicy payday close to $1.7 billion, but it also leaves them with their least sexy business units.
💡Nine Entertainment owns legacy media businesses including print newspapers (Sydney Morning Herald, The Age, Financial Review), radio (3AW & 2GB) and free to air TV (Nine) — all of which has seen declines recently in ad revenue. It also owns streaming platform, Stan, which has become its prized asset.
💡Domain makes up over half of Nine’s market value meaning if the sale goes through, Nine instantly becomes a much smaller company with more cash which can be used for:
But without a clear reinvestment strategy, the short-term cash gain might not be worth the long-term risks.
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