Rightmove’s Australian suitor has abandoned takeover discussions after its sweetened £6.2billion offer was rejected. REA Group confirmed Monday afternoon that it had withdrawn its interest in purchasing the property search site, just hours before a deadline of “put up or shut-up”.
Rightmove shares fell 51 1/4p or 7.7 percent to 617 1/2p. REA’s fourth offer was made on Friday and consisted of 346p cash plus 0.0417 REA share, as well as a 6p Dividend for each Rightmove Share. Total, the offer came to around 780p a share. This was 10p higher than REA previously stated it would pay, and valued Rightmove at £6.2billion.
Rightmove’s Board considered the offer over the weekend. They concluded that REA’s offer was “unattractive” and continued to “materially undervalue Rightmove’s future prospects.”
In response to this latest rejection, REA – which is owned by News Corp at 61 percent – criticised Rightmove’s directors for their “lack of meaningful engagement” which, it claimed, “hindered the ability to advance discussions”. Owen Wilson, REA CEO, stated that “they had nothing to gain by engaging with us.”
REA Group stated that its approach was motivated by a clear strategy and the opportunity to build a global, diversified digital properties company with high margins and cash flow. Robert Thomson, News Corp’s chief executive, stated: “We support the REA team in their decision to pull out of the potential acquisition by Rightmove. We commend REA’s discipline in the financial realm, since it would be foolish to overpay an asset even if that asset had a positive future. News Corp’s transformation has been based on financial discipline, and our recent acquisitions of Dow Jones & HarperCollins are a reflection of that principle.
The company’s progress in India is exciting, as it has now become the leader in the country and is benefitting from its rapid economic growth. Rightmove is a company that we wish well on a market that’s becoming more competitive in Britain. Unfortunately, the board of directors did not make the best decision.
Rightmove has been the most popular site for British people looking to buy a home. Househunters spent more than 8 billion hours on the website in the first six months of this year. Rightmove is a dominant player with an 86 percent market share. Its profit margins rival those of the FTSE 100. For every £1 that its 19,000 estate agents and developers spend, Rightmove earns 69p.
Before REA emerged as a potential investor, Rightmove shares underperformed in the London stock exchange over the last year following the takeover by CoStar of OnTheMarket – a smaller UK competitor – which had announced that it would invest heavily to become No. 1 player.
It was for this reason that REA, with a market capitalization of A$26 billion, wanted to combine the two companies, so it could have the size to counter any threats to Rightmove’s dominance.
Andrew Fisher, Rightmove’s chairman, tried to reassure investors on Monday that directors “remain confident” in the future of Rightmove as a standalone company. He claimed that the last few weeks had been “very disruptive” for Rightmove.
REA was frustrated by the way Rightmove directors handled its takeover interest. Last week, it claimed that they had not communicated with Fisher “beyond brief procedural telephone conversations”.
Hamish McLennan (REA’s Chairman) finally met Fisher on Saturday in London, and a second meeting was held with senior executives of both sides on Sunday. Rightmove stated that the face-to-face meeting did not “materially change” the board’s opinion of REA proposals.
McLennan asked Fisher to extend the deadline but this request was denied. Rightmove stated that there was “considerable” information about Rightmove in the public domain. This meant REA would have enough “information to make a recommendation within the 28 day period specified by the UK Takeover Code”.
According to City takeover regulations, REA only had until Monday at 5pm to submit a firm bid or withdraw. It won’t be allowed to submit another bid for six months, unless someone else makes a bid.
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