The Real Deal New York

CoStar remains interested in buying Reis

August 15, 2008 03:35PM
By David Jones

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CoStar Group Inc., whose second offer to acquire Reis Inc. was rejected earlier this week, said it remains interested in pursuing a possible deal.

CoStar, a leading provider of commercial real estate data, offered for a second time an all-cash price of $8.75 per share to acquire New York-based Reis, a much smaller rival.

“We were disappointed when Reis rejected our offer the first time,” CoStar spokesman Tim Trainor said in an emailed statement. “Frankly, we’re puzzled that they would again turn down what we consider to be a serious and responsible offer without so much as a discussion of its merits.

Trainor said the company finds it “difficult to understand how an all-cash offer that provides a 97 percent premium undervalues its business, as Reis management maintains.”

Prior to the disclosure of the second offer, Reis shares closed at $4.44 a share on Aug. 12, a drop of 20 percent since the original acquisition offer was made on June 5. Reis shares were trading at $7.50 a share mid-afternoon on Friday.

Trainor said that CoStar still believes a merger would benefit both companies, and that it remains “open to discussing a possible business combination with Reis.”

Reis became a publicly traded company in 2007 following the buyout of the firm by Wellsford Real Properties Inc., a developer of commercial real estate.

Reis reported net income of $1 million in the second quarter, compared with a net loss of $8.2 million a year ago. Revenue rose to $12.9 million in the quarter, up from $11 million a year ago.

In a report released earlier this week, William Blair & Co. analyst John Neff said that a CoStar acquisition of Reis would be “highly accretive for CoStar and would be viewed favorably by investors.”

Reis officials were not immediately available for comment. On Wednesday, Reis CEO Lloyd Linford in a statement: “It is extraordinarily disappointing that after our Board unequivocally rejected CoStar’s $8.75 proposal, CoStar has seen fit to come back with exactly the same proposal in a hostile fashion. To judge the value of our company by the daily trading price of its relatively illiquid common stock makes no sense. We trust that our clear second rejection of CoStar’s offer will prompt CoStar to withdraw it.”

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