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LoopNet buyout extended again

by William McConnell In Washington  |  Published January 5, 2012 at 10:15 AM ET
ManRestrainingTradeFTC.jpgShares of commercial real estate information broker LoopNet Inc. fell in trading Wednesday after the company and its proposed buyer, CoStar Group Inc., disclosed that they have "not yet reached substantive agreement" with the Federal Trade Commission on a consent order that will allow the deal to win antitrust clearance.

The disclosure, made in a filing with the Securities and Exchange Commission, indicates the closure of the $860 million deal is likely to occur much later than the market expected and very unlikely to close in January.

LoopNet shares closed at $17.12 on Wednesday, down 6.35%. CoStar's offer is valued at $18.77 per share.

Despite the latest news, sources tracking the deal's antitrust review said they saw nothing in the announcement to indicate that the merger is unlikely to eventually win antitrust clearance.

As an earlier 60-day timing agreement with the FTC was set to expire Wednesday, the companies announced they had agreed to extend the antitrust review by at least another 45 days. Under the new agreement the companies pledged not to close their merger without giving the FTC 45 days notice.

Likewise, the FTC has agreed not to file a lawsuit to block the deal without giving the companies the same amount of notice. If either company or the FTC decides that discussions regarding a consent order are not "moving forward productively," either party may trigger commencement of the 45-day period.

One antitrust expert said the news is negative in terms of timing for the deal. Previous company announcements had led investors to believe a deal with the FTC was near and that the merger could close this month. It's now clear that little progress toward a consent decree has been made with agency staff since the initial 60-day agreement was announced Nov. 4.

However, the FTC's willingness to enter another extended timing agreement indicates that the commission so far is not preparing to block the deal and is willing to work out an agreement, the source said.

The companies gave no indication of what condition might satisfy the FTC's concerns, and when the deal was announced in April, CoStar CEO and co-founder Andrew Florance insisted the companies have very little overlap in their subscriber base and predicted there would be little antitrust risk.

However, small real estate brokerages complained that the transaction would eliminate LoopNet as a provider of low-cost information on local commercial real estate properties. CoStar sells subscription services primarily to institutional investors, lenders and building owners that can afford higher-priced subscriptions to the company's products.

CoStar uses its own researchers to compile data, so CoStar is generally considered more accurate.

LoopNet's subscription costs are lower because it relies on data submitted by real estate brokers at no cost and has more subscribers than CoStar.

Absent an outright divestiture order, a possible remedy could be the licensing of LoopNet's current products by a third party for a limited time in order for other major database publishers such as Bloomberg LP, Thomson Reuters Corp., Reed Elsevier NV or McGraw-Hill Cos. to get into the business.