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CoStar's (CSGP) Acquisition Deal of RentPath Falls Through

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CoStar Group, Inc.’s CSGP acquisition of RentPath is not materializing as the latter has terminated the agreement.

RentPath stated that it cancelled the agreement owing to the Federal Trade Commission’s (“FTC”) decision to sue to stop the transaction. The FTC highlighted that the merger would wipe out competition and was not in favor of customers.

RentPath in a press release stated that its Chapter 11 bankruptcy plan is supported by its lenders, which include reputed alternative asset management firms. The firms have a strong success rate of effectively investing in businesses in comparable circumstances, noted RentPath.

Headquartered in Atlanta, RentPath is a well-known digital marketing solutions company that owns property listing sites like Rent.com, Rentals.com and ApartmentGuide.com.  For the second half of 2020, RentPath recorded traffic growth of more than 40% for the RentPath Network.

CoStar Group, Inc. Price and Consensus

CoStar Group, Inc. Price and Consensus
CoStar Group, Inc. Price and Consensus

CoStar Group, Inc. price-consensus-chart | CoStar Group, Inc. Quote

In February 2020, CoStar announced the acquisition of RentPath for $588 million in cash.

A Look at CoStar’s Acquisition Strategy

CoStar has been active on the acquisition front to boost its footprint in the real estate domain. The company’s buyout strategy is backed by its robust liquidity position. Its cash, cash equivalents and restricted cash as of Sep 30, 2020, were $3.87 billion.

In December 2020, CoStar purchased Houses.com URL. Prior to that, in November 2020, the company announced buyout of Homesnap Inc in an all cash deal pegged at $250 million.

Though the RentPath acquisition did not materialize, the FTC approved the buyout of Homesnap by CoStar on Dec 16. The buyout will assist CoStar in expanding its addressable market in the U.S. residential real estate space.

Previously, CoStar acquired Ten-X for $190 million in June 2020. Ten-X is an online auction platform for commercial real estate. The company is working on merging Ten-X operations with CoStar and LoopNet platforms to improve the visibility for auctions on Ten-X platform.

Apartments.com and LoopNet are two of the largest buyouts for CoStar. The company purchased LoopNet in 2012 at a price of $860 million, while it paid $585 million for Apartments.com in 2014.

Some of CoStar’s other notable acquisitions over the years are Apartment Finder, ForRent.com, STR, Inc, Off Campus Partners, LLC.

In the third quarter of 2020 conference call, management announced the buyout of Germany-based Emporis. Emporis is a commercial real estate data provider with more than 600,000 images across 100 countries along with 700,000 building records in its database. The company will be utilizing the data on Emporis’ platform to speed up its international data collection endeavours.

In third-quarter 2020, CoStar’s revenues jumped 20.6% to $425.6 million.

For the fourth quarter of 2020, the company expects revenue growth between $429 million and $435 million.The Zacks Consensus Estimate for revenues is presently pegged at $1.65 billion, suggesting growth of 17.8% on a year-over-year basis.

Zacks Rank & Stocks to Consider

Currently, CoStar carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader sector are Qorvo QRVO, Shopify SHOP and Cirrus Logic CRUS. All the stocks flaunt a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Qorvo, Shopify and Cirrus Logic is currently pegged at 15.8% 32.5% and 7.1%, respectively.

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