This Is What CoStar Will Do If It Wins CoreLogic

In a letter to CoreLogic’s Board of Directors delivered yesterday morning, the chief executive officer of CoStar Group said the company was “stunned” to read that the company had been acquired by Stone Point Capital and Insight Partners—and offered to buy CoreLogic at a higher value than its competitors. 

The Stone Point deal, which was announced February 4 and valued CoreLogic stock at $80 per share, was “materially less” than CoStar’s previous all-stock offer of $86.30 per share, CEO Andrew C. Florance said. 

“The decision to accept the lower $80 per share bid from a sponsor instead indicates a failure to appropriately value the synergies of our proposal as a strategic bidder,” the letter read.

The synergies Florance outlined are significant and, if realized, would deliver several new products into the market. Indeed CoStar asserts that their new proposal would provide more than $1 billion in additional value to stockholders. 

Florence said the CoStar proposal will present “significant cost synergies, revenue synergies, and organic growth opportunities, including through acceleration of innovation, servicing new and expanded customer segments, and reducing revenue volatility.”

Given CoStar and CoreLogic’s complementary businesses—the former provides commercial real estate solutions, while the latter is focused on residential—the companies would start off by benefiting from cost synergies achieved from the deal, Florance said. Both companies invest in similar underlying technologies and processes that collect and create real estate information, and “there is vast potential to de-duplicate processes and achieve significant cost synergies,” the letter said.

The merger would also triple CoStar’s total addressable market to meet the information and analysis needs of the $180 trillion global real estate industry, CoStar said. The company maintains the deal would “significantly accelerate” CoreLogic’s organic growth rate through product enhancements, new products, more direct selling, cross selling, selling to new audiences and segments, and integrated product offerings.

The partnership would provide the companies’ combined client bases with “integrated solutions” across all relevant real estate companies and would “eliminate the artificial differentiation between commercial and residential real estate digital solutions,” Florance said—resulting in “massive cross-selling opportunities, significantly increasing product uptake, sales and hundreds of millions of dollars in revenue synergies.”

Florance also asserts that many of CoreLogic’s offerings for residential audiences could also be tailored to commercial customers.

“In CoStar Group’s proposed acquisition of CoreLogic the result would be a company with a rock solid balance sheet with strong cash flow for investment, innovation, competition, and growth,” Florance said in closing. “CoreLogic’s employees, clients, communities, and our combined shareholders would benefit from a strong future for the combined company.”