CoStar Gives Up On CoreLogic Pursuit After Another Rejection
CoStar Group has ended its attempt to buy CoreLogic after being rebuffed again.
CoreLogic rejected CoStar's second acquisition offer, it announced in an open letter to CoStar CEO Andy Florance Thursday morning. CoreLogic gave three reasons for its rejection in the letter: that the offer did not include enough cash, that the volatility of CoStar's stock hurt the value of the equity on offer, and that there is too much uncertainty in the potential for antitrust litigation.
"We continue to believe that there is strategic potential in the combination of our two businesses and we request that you reconsider your positions on these important terms," CoreLogic said in the letter.
By Thursday evening, CoStar pulled out of bidding and said it is terminating any further acquisition discussions, because rising interest rates have reduced the value of residential technology companies and altered CoStar's view of CoreLogic's value.
“With interest rates moving up, now is not the time for us to aggressively buy into the residential mortgage market,” Florance said in a statement.
CoreLogic accepted an all-cash acquisition offer from private equity firms Stone Point Capital and Insight Partners worth $6B, or $80 per share, on Feb. 4. In doing so, it rejected an all-stock offer from CoStar worth about $86 per share, among offers from other private equity sources. CoStar then increased its offer to $95.76 per share on Feb. 16, which would have valued CoreLogic at $6.9B, almost a full billion more than the Stone Point and Insight deal — a deal that remains in place even as CoreLogic continues to listen to counteroffers.
CoreLogic claimed in its letter to Florance that CoStar's second offer included $6 per share in cash, which would still leave the large majority of the offer's value subject to CoStar's own stock price. CoreLogic pointed to CoStar's stock having declined in value by 19% since the Feb. 16 offer was made as proof of the risk involved in an offer heavily reliant on stock. CoStar didn't respond to requests for comment by press time.
CoStar, commercial real estate's largest listing platform and property data service, has acquired analytics and data companies such as Ten-X, Homesnap and STR at a rapid pace in the past few years. One of its most recent attempts, a $588M deal to acquire RentPath, was scuttled at the end of last year after the Federal Trade Commission moved to block it. CoStar was forced by a bankruptcy court to pay a $52M breakup fee as a result, The Real Deal reports.
Potential regulatory scrutiny also weighed in CoreLogic's decision to reject CoStar's second bid. CoStar's offer included an option to extend the closing period to 15 months in case of antitrust litigation, though Florance claimed the likelihood of an extended antitrust battle was low. As the Insight and Stone Point deal is on track to close in the second quarter, CoreLogic claimed that it remains preferable to such a long potential delay.
UPDATE, MARCH 4, 6:50 PM ET: CoStar has said it is withdrawing from bidding for CoreLogic. The story has been updated.