District-based CoStar Group said it was close to completing the acquisition of one of its chief competitors last week after it and the company it targets, LoopNet, reached a mutually acceptable agreement with Federal Trade Commission staff.
In April 17 filings with the Securities and Exchange Commission, the companies said they hope to complete the merger they have been planning for a year by April 30.
Once rivals in offering commercial real estate listings and data, CoStar and LoopNet expected the $860 million deal to close much more quickly, but have failed to win antitrust clearance from the FTC. During the first week of 2012, having “not yet reached substantive agreement” with the FTC, they agreed to extend a waiting period to consider what, if any, concessions they might have to make to get the green light from regulators, according to a filing with the SEC.
FTC commissioners could decide to close the case without taking action or challenge the transaction in court. To win approval, CoStar, LoopNet or both companies may have to sell some business units.
In its filing last week, CoStar said that it “believes the proposed consent order will not affect its ability to realize the material benefits of the merger.” The companies agreed not to release further details until the commissioners act and CoStar chief executive Andrew C. Florance, reached by phone, said he will not comment until then. An FTC spokesman said the agency would not comment before a ruling.
William A. Warmington Jr., a Raymond James analyst, wrote last week that although he expected the deal to close by April 30, it was possible one or both companies would have to shed some units. Warmington wrote that “speculation has generally included the possible divestiture” of Xceligent (a LoopNet data service) or Showcase (a CoStar property marketing vehicle).
Another possibility is the companies agree to preserve some free or low-cost access to data, according to Brandon Dobell, a William Blair analyst. “I get the feeling that there’s not a divestiture sticking point … this is more about they have got too much control,” Dobell said.
The companies could also agree that they are “not going to make any more acquisitions in this market and this market is going to be defined by conversations with the FTC,” Dobell said.