Rightmove has received a third takeover bid of £6.1 billion from a Melbourne property company, after having rejected two previous offers.
Rea Group’s latest indicative offer – 341p cash and 0.0422 Rea shares – values the UK’s property website at 770p per share. This is a 39 percent premium over Rightmove’s previous share price.
Andrew Fisher, Rightmove’s chairman, stated: “The board, along with its financial advisors, will carefully review the increased proposal.”
Rightmove shares closed at 679 1/2p, up 5 1/4p or 0.8 percent.
Rea stated that it was prepared to engage with Rightmove immediately. Rea is believed to be frustrated by the lack of engagement on the Rightmove board following its offers, which they believe are compelling.
Owen Wilson, Rea’s chief executive, stated that “we are genuinely dismayed at the lack engagement of Rightmove board.” We live in an increasingly competitive world, and this proposed deal would bring two complementary digital property businesses together for growth and investment. The offer was a “combination of immediate cash value and the opportunity to share in Rea’s future growth”.
Rightmove rejected both previous offers, calling them “opportunistic”, and “fundamentally undervaluing the company and its future prospects”.
Rightmove holds a 86 percent share of the UK house search market. The portal has high profit margins. For every £1 that estate agents and developers spend on Rightmove in the first six months, Rightmove made 69p. Around 19,000 estate agencies and developers advertise their services on the portal.
The shares of OnTheMarket have been underperforming the market in the last year due to fears that the American property group CoStar could increase its competition. OnTheMarket was acquired for £99million by CoStar towards the end the year. Rea Group, Australia’s largest property platform, is now diversifying into mortgages
News Corp owns 61 percent of Rea. It was founded 1995, and its market capitalisation is A$26 billion. It plans to apply for secondary listing in London of all its ordinary shares, which will allow trading on the London Stock Exchange as well as the Australian Securities Exchange.
It is Australia’s largest property platform. The company believes that its expansion into “adjacent” areas, such as mortgages, will support the commercial rationale of its offer.
It is the owner of Mortgage Choice, Australia’s biggest mortgage broker. The Australian company could move into the UK market by acquiring Rightmove. Rightmove already identified this area as a possible expansion.
Jefferies, an investment bank, stated in a note to analysts that Rea’s tone “has changed, becoming firmer.” This latest approach, in our opinion, may be the start of the endgame. Rea’s rejection of Rightmove’s latest offer increases the risk of Rea forgoing a recommended offer and Rea going hostile, pursuing an acquisition without the consent from the target company management.
Rea noted that Rightmove’s market value has not “continued to rise for the past two years”, despite its ongoing share-buyback program and revised strategy, announced at capital markets day last year. The Australian Stock Exchange saw shares of Rea fall A$5, or 2.5%, to A$194 per share.
Fisher stated in his statement on Monday: “Rightmove has a clear strategy and an excellent track record for delivering results, as well as a strong team of management.” The board of directors is confident about the company’s long-term and short-term prospects and believes there is a large runway to continue creating shareholder value.
The board will continue to act in the best interests of our shareholders, and will respond to any new proposals as soon as possible. Rea, under the takeover code of the City, has until 5pm September 30th to either make a firm bid or walk away.
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