Harry Cummins
Updated on: October 11, 2024 12:01 am GMT
A bid worth £5.6 billion by REA Group, the Australian property firm majority-owned by Rupert Murdoch’s News Corp, has been rejected by the board of Rightmove, the largest online real-estate portal in the UK. The proposed offer of 705p per share, which represented a premium of 27% compared to Rightmove’s recent share valuation, was deemed “opportunistic” and undervalued the company’s future potential.
Details of the Proposal
REA Group announced its interest in Rightmove on September 5, 2024, through a non-binding indicative proposal aimed at acquiring the entirety of Rightmove’s issued share capital. The offer was communicated less than a week after pronounced discussions surrounding a potential cash and share deal began circulating in financial markets. However, the Rightmove board, upon careful consideration in collaboration with its financial advisers, rejected the proposal on September 10, stating that the terms failed to reflect the company’s underlying value and future growth opportunities.
Rightmove’s Response
In a statement following the rejection, the Rightmove board emphasized its commitment to maximizing shareholder value, arguing that REA’s proposal fundamentally failed to accurately capture Rightmove’s robust operational performance and anticipated market enhancements. The board conveyed to shareholders that they should take no immediate action in response to REA’s offer, reiterating its confidence in the company’s long-term prospects amidst a rebounding UK property market.
Market Analysis and Reactions
Analysts and market watchers have characterized REA’s bid as misguided, noting that Rightmove controls over 80% of the UK online property market. Many industry experts view the bid as a lowball offer, especially as profits in the property sector are expected to amplify in the years ahead. For example, Peel Hunt analysts highlighted Rightmove as the “cheapest publicly listed classifieds business in Europe,” thus suggesting that the company possesses significant untapped value.
A shareholder of Rightmove, Sanford DeLand Asset Management, echoed similar sentiments, noting that the offer comprised a disproportionately high percentage of shares in REA, which they described as a “lower-quality business.” This perspective points to strategic concerns regarding the comparative quality of the two companies involved in the deal.
Implications for REA and Future Moves
In light of the rejection, REA Group may be prompted to reconsider its offer, with analysts speculating that a sweeter bid in excess of £7 billion might be necessary to garner sufficient support from Rightmove’s board. However, should a deal materialize, REA plans to initiate a secondary listing on the London Stock Exchange to broaden investor access to its diversified digital property services, thus enhancing its financial foothold in the UK market.
Historical Context of REA and News Corp
Rupert Murdoch’s involvement in the Australian property market has historical significance. His son, Lachlan Murdoch, originally acquired a 44% stake in REA in 2001 for approximately A$2 million and subsequently increased the family’s stake to 62% in 2005, following unsuccessful takeover negotiations. Since then, REA has significantly grown in valuation, now worth around A$26 billion, while News Corp’s digital real-estate services division accounts for a notable share of the company’s global profits.
Competitive Landscape in Property Portals
The competitive dynamics of the online property sector are illustrative of its rapid evolution. In recent months, other players have also been aggressive in consolidating their positions. In October 2023, the U.S. property data firm CoStar made headlines with its £100 million acquisition of the UK indoor property website OnTheMarket, signaling its intent to establish a foothold in the European market. Similarly, private equity firm Silver Lake’s acquisition of the second-largest UK property portal, Zoopla, for £2.2 billion in 2018 serves as an indicator of the financial stakes drawn into this arena.
This growing competition may contribute to Rightmove’s confidence in rejecting REA’s offer, as it navigates not only external acquisition efforts but also the internal valuation of its operations in a revitalizing property landscape.
Conclusion
Rightmove is thinking about its next steps because REA Group is interested in buying it. Investors and analysts are paying close attention to what happens next. Rightmove didn’t accept REA’s first offer, which shows that they believe they are worth more. This could lead to more talks later, as the online real estate market is very competitive.
