Domain share price rockets 8% higher: Is it a takeover target?

The Domain Holdings Group Ltd (ASX: DHG) share price rocketed 8% higher on the ASX yesterday despite no company-specific news being released – so what caused the surge?

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The Domain Holdings Australia Ltd (ASX: DHG) share price rocketed 8% higher on the ASX yesterday despite no company-specific news being released – so what caused the surge?

Why Domain's share price went bananas yesterday

While Domain hasn't made any ASX releases since 14 March 2019, the real estate group's share price has climbed 19.3% higher since last Wednesday.

The key driver here is the mega-merger between Nine Entertainment Co Holdings Ltd (ASX: NEC) and Fairfax Media which was completed in December 2018.

The two media companies eyed a consolidation of sorts as profitability in the media business remains under pressure and the competitive forces in the industry continued to squeeze many of the big names in Australia.

Nine is the majority owner of Domain with a 59% stake in the property platform, with speculation that Domain is set to be sold to the highest bidder as part of Nine's sell-off of 160 regional and community newspapers.

According to an article in the Sydney Morning Herald, Domain was considered a centrepiece of the $4 billion merger with its regular magazines being a staple of many of the regional and community newspapers that are being sold across Australia.

Where will Domain's share price go from here?

With the due diligence phase of the auction for Nine's regional business set to end on April 24, there is speculation that a deal could be arranged before the end of April.

In my view, it's likely that this ongoing bidding war is pushing the Domain share price higher, and it has climbed 31% in 2019 alone.

Until there's a deal announced I wouldn't be surprised to see Domain's share price climb higher still, while fellow real estate platform REA Group Ltd (ASX: REA) has seen significant in its own valuation so far this year.

The REA share price is up just 3% and could be in for more turbulence until the M&A situation becomes clearer on Domain and therefore its competitive environment going forward.

Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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