Rightmove’s directors have rejected a better takeover bid from an Australian competitor, who valued the online property portal in £6 billion. The FTSE100 company stated that the offer by REA Group valued its shares at $759 per share and that this deal “materially underestimates” the company. The suitor increased the offer to 341p cash and 0.0422 REA shares for a third round.
Rightmove stated that “the board, together with its financial advisors, considered the increased offer and concluded that it continues to be unattractive. It also materially undervalues both the company and its prospects for the future.” The board unanimously rejected this increased proposal.
The company enjoys a high profit margin and has a 86 percent share of the UK house search market. Rightmove made 69p profit for every £1 that estate agents and developers spent with the portal in the first six months. Around 19,000 estate agencies and developers advertise their services on the portal.
Rightmove stated that a drop in REA’s share price had resulted in the British company being valued at 759p per share at the close of business on Tuesday night. The third offer valued the British business at 770p. At the close, Rightmove shares were down 10 1/2p or 1.6 percent, to 672 1/2p.
In recent years, its shares have been pressured due to concerns over increased competitiveness in the domestic property market by CoStar, an American powerhouse in the real estate market, which bought OnTheMarket a rival platform. Rightmove’s board has announced plans to expand the company by adding new products, including commercial property and mortgage brokerage. The company is planning to expand by adding new products such as commercial real estate and mortgage brokerage.
The publisher of the REA group (which is owned by News Corp at 61%) said that it was “disappointed” by the latest rejection by the Rightmove board and frustrated by the fact that REA had not engaged in any substantive way with Rightmove, except for the rejections of its three previous proposals.
The Melbourne-based firm said that it still believes its sweetened indicative offers “represents an extremely compelling proposition for Rightmove shareholders at a substantial premium”. The company urged Rightmove investors to “encourage Rightmove board to engage constructive discussions with Rea in order to work toward a recommended transaction”.
REA was founded in 1995, and its market capitalisation is A$25.5 billion. (£13 billion). The Takeover Panel’s rules state that REA has until 30 September to submit a firm bid or withdraw.
Sean Kealy is an analyst with Panmure Liberum. He said that REA would likely start contacting Rightmove shareholders to get their opinions on a potential combination. He stated that it might not be possible to increase the offer as this would “place a significant burden on business”. We are aware of the stronger language used in the third offer as well as REA publishing a supplementary document detailing the offer. It is likely that it will choose to contact shareholders rather than the Rightmove Board at this point, if not already.
REA Group, which is listed in Australia, has stated that it will seek a secondary London listing if this deal goes through. It said on Monday that its approach was not “opportunistic”, because Rightmove shares had “lacked sustained upward momentum for the past two years”, even though it had launched a share-buyback program and made a push into non core business areas.
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