After CoStar Group, Inc announced that it intends to acquire LoopNet, Inc. (Nasdaq:LOOP) at approximately $860 million an investigation on behalf of investors LoopNet, Inc. (NASDAQ:LOOP) over possible breaches of fiduciary duty.
The investigation by a law firm concerns whether certain directors and officers at LoopNet, Inc. or others breached their fiduciary duties in connection the proposed merger.
On Wednesday, April 27, 2011, CoStar Group, Inc. (Nasdaq:CSGP) announced the signing of an agreement to acquire LoopNet, Inc. (Nasdaq:LOOP). Pursuant to the merger agreement, LoopNet shareholders will receive $16.50 in cash and 0.03702 shares of CoStar Group common stock for each share of LoopNet common stock, representing a total equity value of approximately $860 million and an enterprise value of $762 million.
In response to the merger news LOOP shares increased from $14.40 on Wednesday to $18.47 on Thursday.
However, certain LoopNet's directors, certain executive officers, and certain significant shareholders representing 32% of LoopNet's outstanding shares, have already signed a voting agreement in support of the deal. Further, the agreement contains a termination fee of $25.8 million and a 'no solicitation clause.' Additionally LoopNet has performed well for its investors. LoopNet recently announced strong financial results for the first quarter 2011, with revenue of $20.7 million, compared to $20.0 million in the fourth quarter of 2010, and $18.8 million in the first quarter of 2010. Furthermore, over the past four years LoopNet reported consistent 12months Total Revenue ranging between $70.73million and $86.07million. Its Net Income over the same time frame rangd from $11.75million to $21.13million.
Therefore the investigation concerns whether the LoopNet Board of Directors undertook an adequate and fair sales process to obtain fair consideration for all shareholders of LoopNet, Inc. (NASDAQ:LOOP) and breached their fiduciary duties to LoopNet (LOOP) shareholder by failing to adequately shop the Company before entering into any transaction.The investigation concerns also whether CoStar Group, Inc would underpay for NASDAQ:LOOP shares, thus unlawfully harming NASDAQ LOOP stockholders. A potential class action lawsuit would seek to maximize the amount of money and information NASDAQ LOOP shareholders would receive in a buyout, so the law firm.