DEFM14A: CoStar Group to Acquire Matterport in $1.6 Billion Deal, Stockholders to Vote

Matterport stockholders are set to vote on a proposed merger agreement with CoStar Group, which would result in Matterport becoming a wholly-owned subsidiary of CoStar.

Summary

• CoStar Group, Inc. plans to acquire Matterport, Inc. through a merger agreement.
• The deal involves Matrix Merger Sub, Inc. and Matrix Merger Sub II LLC, both wholly-owned subsidiaries of CoStar Group.
• Matterport stockholders will receive $2.75 in cash plus shares of CoStar Group common stock for each share of Matterport Class A common stock they own.
• The exchange ratio for the stock portion depends on the average trading price of CoStar Group's stock over a 20-day period prior to the merger's effective time.
• If CoStar's average share price is $94.62 or higher, the exchange ratio is 0.02906; if it's $77.42 or lower, the ratio is 0.03552; otherwise, it's $2.75 divided by the average share price.
• The transaction price represents a premium of approximately 216.1% over Matterport's closing price on April 19, 2024.
• Upon completion, former Matterport stockholders are expected to own approximately 2.8% 3.4% of CoStar Group's outstanding common stock.
• Matterport will hold a special meeting of its stockholders on July 26, 2024, to vote on the merger agreement.
• The Matterport board of directors unanimously recommends that stockholders vote in favor of the merger agreement.
• The deal is subject to customary closing conditions, including regulatory approvals and Matterport stockholder approval.

Sentiment

Score: 7

Explanation: The document is generally positive due to the high premium offered to Matterport stockholders and the unanimous recommendation from the Matterport board. However, there are also risks and uncertainties associated with the deal, which temper the overall sentiment.

Positives

• Matterport stockholders will receive a significant premium of 216.1% over the stock's closing price before the announcement.
• Stockholders will receive both cash and stock, allowing them to realize immediate value and participate in CoStar Group's future growth.
• The Matterport board of directors unanimously recommends the deal, indicating their belief it's in the best interest of stockholders.

Negatives

• The value of the stock portion of the consideration will fluctuate with CoStar Group's stock price until the deal is complete.
• Matterport stockholders will own a small percentage of CoStar Group after the merger, reducing their influence.
• The deal is subject to closing conditions, including regulatory approvals, which could delay or prevent the merger.

Risks

• Fluctuations in CoStar Group's stock price could affect the value of the merger consideration.
• Failure to attract and retain key Matterport employees could diminish the anticipated benefits of the merger.
• Regulatory approvals may be delayed or come with conditions that reduce the anticipated benefits.
• Business relationships with third parties may be disrupted due to uncertainty associated with the merger.
• Litigation challenging the merger may increase costs and prevent the merger from being completed.
• The integration of Matterport into CoStar Group may not be as successful as anticipated.

Future Outlook

Matterport and CoStar Group are working to complete the Mergers as soon as practicable and continue to anticipate obtaining all requisite stockholder and regulatory approvals during 2024.

Management Comments

• On behalf of the Matterport board of directors, we would like to express our appreciation for your continued support of, and interest in, Matterport.
• The Matterport board of directors has unanimously (i) determined and declared that the Merger Agreement and the transactions contemplated thereby, including the Mergers, are fair to and in the best interests of Matterport and its stockholders, (ii) declared that the Merger Agreement, the Mergers and the other transactions contemplated thereby are advisable and (iii) approved the execution, delivery and performance by Matterport of the Merger Agreement and the transactions contemplated thereby, including the Mergers.

Industry Context

This acquisition reflects a trend of consolidation in the real estate technology sector, with larger players seeking to expand their offerings and market reach by acquiring innovative companies like Matterport.

Comparison to Industry Standards

• Comparable companies in the real estate data and analytics space include Zillow Group, Redfin, and CoreLogic.
• CoStar Group's acquisition of Matterport is similar to previous acquisitions in the tech industry, where established companies acquire innovative startups to enhance their product offerings and market position.
• The premium offered in this transaction is within the range of premiums observed in other tech acquisitions, but the specific terms reflect the unique circumstances of Matterport and CoStar Group.

Legal Proceedings

• On June 3, 2024, a purported Matterport stockholder filed a complaint in the U.S. District Court for the Northern District of California, captioned Andrew Rose v. Matterport, Inc., et al., Case No. 5:24-cv-3313, naming Matterport and each member of the Matterport Board as defendants.
• The complaint alleges that CoStar Groups Form S-4 Registration Statement filed with the SEC on May 21, 2024 is materially misleading and omits certain purportedly material information relating to the sales process, financial projections of Matterport and CoStar Group, the valuation analyses performed by Qatalyst Partners, and negotiations over the terms of post-transaction employment of certain Matterport employees.
• The complaint asserts violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against all defendants, and violations of Section 20(a) of the Exchange Act against the Companys Board.
• The complaint seeks, among other things, an injunction enjoining consummation of the Mergers, an order directing the individual defendants to issue a new Registration Statement, and an award of plaintiffs costs of the action, including plaintiffs reasonable attorneys and experts fees.
• Additionally, certain purported Matterport shareholders have delivered demand letters (the Demands) and a draft complaint alleging similar deficiencies or omissions regarding the disclosures made in the Registration Statement, and requesting relevant books and records.

Stakeholder Impact

• Matterport stockholders will receive a combination of cash and CoStar Group stock.
• Matterport employees may experience changes in their roles and responsibilities after the merger.
• Customers of both companies may benefit from the combined product offerings and expanded resources.

Next Steps

• Matterport stockholders will vote on the merger agreement at a special meeting on July 26, 2024.
• CoStar Group and Matterport will seek regulatory approvals for the merger.
• The companies will work to complete the merger as soon as practicable following the satisfaction of all applicable conditions.

Key Dates

Keywords

Matterport, CoStar Group, merger, acquisition, stockholders, common stock, exchange ratio, premium, regulatory approvals, special meeting