(Sept 25): Rightmove plc rejected a third takeover proposal from REA Group Ltd, saying the bid that valued the UK property portal at £6.1 billion (US$8.2 billion or RM33.7 billion) continues to be unattractive. The Australian suitor said it was disappointed.
REA, which is part of media mogul Rupert Murdoch’s empire, earlier this week put in a sweetened proposal, valuing Rightmove at 770 pence a share — about 2.7% more than the previous bid and 39% higher than the stock’s Aug 30 closing price before the disclosure of its first offer. It even pushed the London-based firm’s shareholders to agitate for talks to kick off after expressing frustration at Rightmove’s refusal to discuss a deal following its two previous proposals.
Rightmove’s board “concluded that the increased proposal continues to be unattractive and materially undervalues the company and its future prospects”, the UK company said in a statement on Wednesday. “Accordingly, the board unanimously rejected” the bid on Sept 24, it added.
In a separate statement, Richmond, Victoria-based REA said it’s frustrated that it still had no substantive engagement with Rightmove. It said its latest offer “represents a highly compelling proposition for Rightmove’s shareholders at a significant premium to relevant trading metrics”.
The UK’s go-to website for property listings has managed to extract quickfire sweeteners from REA worth about £500 million by keeping its doors closed to a deal. Under the terms of the most recent offer, Rightmove investors would receive 341 pence in cash and 0.0422 new REA shares.
The risk for Rightmove’s shareholders is that REA walks away and shares in the UK company slump after rallying more than 20% since the start of September. The stock last traded at about 683 pence in London trading on Wednesday. REA shares have tumbled 12% since the first bid announcement.
“We assume that REA recognises that while it might have the appetite and acceptances from Rightmove shareholders to go hostile, the large equity component of its possible offer leaves it boxed in by pressure on the REA share price,” Jefferies said in a research note.
Rightmove has maintained steady revenue growth in recent years, and its future prospects are looking bright, as the UK housing market is expected to pick up on declining interest rates and efforts by the new Labour government to increase housing supply through a slew of planning reforms.
The strength of Rightmove’s fundamentals explain the acquisition interest, with more high-single-digit sales gains likely in 2024 and 2025, according to a Bloomberg Intelligence (BI) report. A bid north of 800 pence is more likely to be accepted, according to BI.
While Rightmove enjoys the largest market share in the UK property portal market, rival OnTheMarket plc recently launched an expansion drive after being acquired by US real estate firm CoStar Group Inc. Giles Thorne, a Jefferies analyst, described CoStar’s investment in OnTheMarket as “a serious competitive threat”.
REA has already expanded into other markets including India, and plans to have a secondary stock market listing in London if it buys Rightmove.
In its statement, REA again urged Rightmove shareholders to encourage their board to initiate “constructive discussions” towards a potential deal ahead of a deadline. Under the UK’s takeovers code, REA has until 5pm on Sept 30 to announce a firm intention on whether to make a bid.
“REA remains ready to engage immediately with the board of directors of Rightmove,” it said.
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