FTC Approves CoStar’s Acquisition of LoopNet—with Conditions

By Scott Baltic, Contributing Editor

Last week’s announcement that the Federal Trade Commission had approved CoStar Group’s acquisition of LoopNet Inc. brings to fruition—almost a year to the day later—a much-noted transaction that also contains the seeds of further change—in the form of a substantial competitor—not far down the road.

The acquisition of online commercial real estate marketplace LoopNet by its one-time rival, commercial real estate information firm CoStar, is slated to close today. When first announced late last April, the deal was valued at $860 million, with an enterprise value of $762 million.

A LoopNet spokesperson declined to comment on the transaction but said that more information would be available in a few days, presumably alluding to a conference call scheduled for Wednesday.

CoStar believes that the transaction will take the size of its paid subscriber base from 95,000 to about 160,000.

CoStar founder &  CEO Andrew Florance estimated a year ago that the overlap between CoStar and LoopNet subscribers is as little as 10 percent, which would allow for significant cross-selling opportunities between the two companies’ customer bases. The merged entity was also projected to save $20 million in overhead annually within two years of closing.

The parties summarized the deal as combining two profitable companies with strong cash flows. Both announced strong first quarter 2012 financial results, based on which they have total annualized revenue of $366 million.

The consent order the two companies agreed to and the FTC approved stipulates, among other provisions, that LoopNet will divest of its minority interest in Xceligent Inc.

Separately, Xceligent, of Independence, Mo., and DMG Information, of Stamford, Conn., announced that DMGI plans to partner with Xceligent’s founder & CEO, Doug Curry, and management team to buy the company from LoopNet and other investors. Xceligent provides “fully researched information and marketing tools” for the commercial real estate market, including an inventory of commercial properties, available space for lease or sale, sales comps and transaction histories.

With 210 employees, Xceligent currently operates in 30 markets, but DMGI has agreed to provide funding that will allow it to expand within 36 months to cover the largest 65 U.S. markets and later the remainder of the United States.

For a CPE lineup of 2011’s top 11 deals, B. Riley & Co. director of research Ian Corydon commented that the deal “has made sense for a long, long time.”