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CoStar Group, Inc. Wins Federal Trade Commission Approval to Acquire LoopNet, Inc.

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Combination of the most comprehensive commercial real estate information service with the leading online commercial real estate marketplace is expected to deliver more value to the $11 trillion commercial real estate industry

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WASHINGTON, DC – April 26, 2012 – CoStar Group, Inc. (NASDAQ: CSGP), commercial real estate's leading provider of information and analytic services, announced today the Federal Trade Commission (“FTC”) has approved a consent order, clearing the way for the completion of the merger of CoStar and LoopNet that was previously announced on April 27, 2011. The waiting period imposed by the Hart-Scott-Rodino Act was terminated upon the approval of the FTC Commissioners. The merger is expected to close on or about April 30, 2012.

“CoStar revolutionized how the industry researches commercial real estate while LoopNet revolutionized the way the industry markets commercial real estate, and we expect the combination of our companies to give the $11 trillion commercial real estate market the full benefit of the Internet,” said Andrew C. Florance, Founder and Chief Executive Officer of CoStar.  “After a thorough review by the FTC of this transaction, we are thrilled to win FTC approval.”  

“CoStar and LoopNet have been at the cutting edge of innovation in their respective businesses, and we believe the two companies will be even stronger together,” said Richard Boyle, Chairman and Chief Executive Officer of LoopNet. “This transaction combines the capabilities and best practices of two successful and very complementary companies.  We are excited about the possibilities that we can create together.”

Highlights of the Combination

  •  Combines industry-leading, large-scale, game-changing technology platforms

 

  • Maximizes customer value with highly complementary operations that create a larger, more robust market place with hundreds of thousands of participants and billions of potential connections

 

  • Combines two profitable companies with strong cash flows, while creating potentially significant opportunities to cross-sell services and reduce costs 

 

  • Both companies announced very strong first quarter 2012 financial results further signaling a continued recovery in the commercial real estate sector

 

  • Based upon the first quarter of 2012, the combined companies have annualized revenue of $366 million

The commercial real estate market is one of the largest asset classes in the United States with over $11 trillion in value, and the potential size of the industry providing marketing and information services to commercial real estate professionals is approximately $30 billion, according to CoStar.

CoStar believes that the transaction will take the size of CoStar’s paid subscriber base from 95,000 to approximately 160,000.  This represents approximately 15% of the estimated one million participants in the commercial real estate market.  CoStar believes that once the two companies’ databases are combined, CoStar will have a database with approximately 2 million active listings, giving customers a more comprehensive and efficient view of the market.

“We expect the scale, complementary service capabilities and diversified client and geographic footprint created by the combination of CoStar and LoopNet will drive significant revenue opportunities,” added Florance. “We believe that the combined company will be the premier resource for researching, analyzing, and marketing commercial real estate properties online and will be positioned to provide more widespread market coverage for customers ranging from large, national brokerage firms, property owners and institutional players to small, local brokers, owners and investors.”

LoopNet.com is the industry’s largest and most heavily trafficked online marketplace with five million members registered since 1995 and nearly three million unique monthly visitors according to Google Analytics. LoopNet is also the leading website for marketing commercial property listings.

“As commercial real estate brokers and owners continue to move property listings to online channels, we fully anticipate LoopNet’s marketplace will become increasingly important to those marketing or searching for properties,” Florance stated.

CoStar operates the largest and most robust commercial real estate information database with 81.8 billion square feet of office, retail and industrial inventory, 1.5 million listings and 12.7 million images.

Terms of the Consent Order

The Consent Order agreed to by CoStar and LoopNet, and approved by the FTC, is available on the FTC’s website at www.ftc.gov.  Among other things, the consent decree provides that: 

 

  • LoopNet will divest its minority interest in Xceligent.  Additionally, as part of the wind-down of the LoopNet-Xceligent relationship, LoopNet will provide to Xceligent on a one-time basis limited contact information for individuals who have listed properties in LoopNet in certain markets. No CoStar data or LoopNet listings are being provided to Xceligent.

 

  • CoStar will continue certain customary practices that the FTC considers pro-competitive, such as CoStar’s practice of selling its information products separately and on a market-by-market basis.  CoStar also has agreed to continue its practice of not discriminating against clients who subscribe to or endorse competing services.

 

  • Any CoStar Property Professional®, COMPS®, or Tenant® client with a multi-year contract will have a one-time right to terminate on 12 months’ advance written notice.

 

  • CoStar has a handful of contracts with large brokerage clients that prohibit those clients from having ownership interests in CoStar’s competitors and from providing competitors with information about commercial real estate properties that they do not represent.  CoStar has agreed to revise those agreements to allow those firms to take passive ownership stakes in CoStar’s competitors (limited to 20%) and to provide competitors with information about properties that they do not represent, provided that they agree to record keeping requirements and quarterly audits that ensure that CoStar’s data does not get passed to competitors.

 

  • As per FTC practice, CoStar has agreed to a private monitor who has been appointed to oversee CoStar’s compliance with the consent order. The FTC has selected industry veteran Guy Dorey.

 

Advisors  

J.P. Morgan acted as CoStar’s financial advisor and Simpson Thacher and Bartlett LLP acted as legal counsel to CoStar. Evercore Partners, LLC acted as LoopNet’s financial advisor, and Davis Polk & Wardwell LLP acted as legal counsel to LoopNet.   

Conference Call

Management will conduct a conference call to discuss the closing of the LoopNet transaction and to provide combined guidance for the companies for 2012 at 4:30 p.m. ET on Wednesday, May 2, 2012. The audio portion of the conference call will be broadcast live over the Internet at http://www.costar.com/investors.aspx. To join the conference call by telephone, please dial (800) 230-1093 (from the United States and Canada) or (612) 288-0329 (from all other countries) and refer to conference code 247060. An audio recording of the conference call will be available approximately one hour after the live call concludes and remain available for a period of time following the call. To access the recorded call, please dial (800) 475-6701 (from the U.S. and Canada) or (320) 365-3844 (from all other countries) using access code 247060. The webcast replay will also be available in the Investors section of CoStar's web site for a period of time following the call. 

About CoStar Group, Inc.

CoStar Group (Nasdaq: CSGP) is commercial real estate's leading provider of information and analytic services. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe with a staff of approximately 1,500 worldwide, including the industry's largest professional research organization. For more information, visit www.costar.com.

About LoopNet, Inc.

LoopNet operates the most heavily trafficked commercial real estate marketplace online with more than 5 million registered members and 2.8 million unique monthly visitors, as reported by Google Analytics.

The LoopNet marketplace covers all commercial property categories, including office, industrial, retail, multifamily (apartment properties for sale), hotel, land, specialty properties, investment properties and businesses for sale. LoopNet customers include virtually all of the top commercial real estate firms in the U.S., including Apartment Realty Advisors, Avison Young, Cassidy Turley, CB Richard Ellis, Coldwell Banker Commercial, Colliers International, Cushman & Wakefield, Jones Lang LaSalle, Lee & Associates, Lincoln Property Company, NAI Global, Newmark Knight Frank, The Shopping Center Group and Sperry Van Ness.