Exclusive: CoreLogic asks CoStar for assurances on antitrust risk - sources

Greg Roumeliotis
·4 min read

By Greg Roumeliotis

(Reuters) - U.S. property data and analytics company CoreLogic Inc has asked peer CoStar Group Inc for more assurances that it can complete their combination should it attract antitrust scrutiny, people familiar with the matter said.

CoStar unveiled a $6.9 billion all-stock bid for CoreLogic earlier this month, after the latter agreed to sell itself to a private equity consortium of Stone Point Capital and Insight Partners for about $6 billion.

CoreLogic has informed CoStar it would be willing to declare its bid superior and abandon its deal with the private equity firms if CoStar provides more certainty that the transaction will be completed expeditiously, the sources said.

A decline in recent days in CoStar shares has highlighted the need for such certainty for CoreLogic's board, according to the sources. CoStar's bid was worth $95.76 per share when it was unveiled on Feb. 16. It was worth about $82 per share on Thursday afternoon because of the decline in CoStar's shares, only slightly more than the $80 per share all-cash bid CoreLogic accepted from Stone Point Capital and Insight Partners. The more time lapses, the more the value of CoStar's bid could change.

CoreLogic believes that CoStar could add cash to its bid to provide more certainty on the value of its offer, according to one of the sources.

While some of CoreLogic's demands involving technical aspects of the deal are expected to be ironed out with CoStar, the antitrust provisions remain a significant sticking point, the sources said.

CoreLogic initially asked for a "hell-or-high-water" clause that would force CoStar to undertake all actions that antitrust regulators may request for the deal to happen, including any necessary divestitures, the sources said.

It has since dropped this request but still wants CoStar to make commitments to closing the deal, including accepting a deadline for completing the transaction akin to the six-month deadline that the private equity firms agreed to, the sources said. CoStar is currently pushing for a 12-month deadline, the sources added.

CoStar has argued there is little antitrust risk for the deal, and that regulators may be able to approve it in as little as one month, according to the sources.

An attempt last year by CoStar to buy another company, apartment search site operator RentPath Holdings Inc, for $588 million was thwarted by U.S antitrust regulators. RentPath sued CoStar over the deal's $58 million breakup fee, and last week reached a settlement recovering most of that fee.

CoreLogic's board wants to make sure that any deal it inks with CoStar does not get torpedoed by regulators, the sources said. It has asked for CoStar to pre-fund its proposed $330 million breakup fee, and also not to negotiate with potential acquirers of its assets until the deal closes, the sources added.

It remains unclear whether CoStar and CoreLogic will be able to negotiate a deal, the sources said, requesting anonymity because the talks are confidential. CoStar and CoreLogic did not immediately respond to requests for comment.

PROPERTY MARKET BOOM

The takeover interest in CoreLogic came after activist investors Senator Investment Group LP and Cannae Holdings Inc began pushing the company to seek a sale by mounting their own acquisition bid, which they abandoned once the sale process got under way.

A big part of CoreLogic's business is thriving, as low interest rates have fueled a boom in parts of the property market.

CoStar, which also participated in the auction for CoreLogic before losing out to the private equity consortium, reported fourth-quarter earnings on Tuesday that beat most analysts' expectations. Yet its shares have been dropping amid a broader sell-off in technology stocks and uncertainty over its bid for CoreLogic.

CoStar has said its acquisition of CoreLogic would result in $150 million to $250 million in annual cash flow synergies. It has argued those synergies alone are worth several billion dollars to shareholders of the combined company.

It has also argued that it does not need to place an "equity collar" on its all-stock bid, which would protect CoreLogic shareholders from CoStar shares dropping too much, given the value of these synergies and the deal's rational. CoreLogic, on the other hand, believes that the drop in CoStar's shares shows the need for an equity collar, one of the sources said.

CoreLogic shareholders would own 16.2% of the combined company under CoStar's terms. Were it to sweeten its bid further by offering more of its shares, it would trigger a requirement under its bylaws for CoStar shareholders to vote on the deal. Under the proposed offer, only CoreLogic shareholders need to vote on the deal should its board approve it.

(Reporting by Greg Roumeliotis in New York; Editing by Nick Zieminski)