Murdoch's REA Eyes Bid for UK Housing Giant Rightmove
Rightmove's steady revenue growth and the UK housing market's expected pickup as interest rates decline make it an attractive target for REA Group.
Rea GroupRightmoveNews CorpDigital Real EstateUk Housing MarketReal Estate NewsSep 02, 2024
The Australian property listing provider, which is controlled by News Corp., said Monday it's considering a possible cash and share offer for Rightmove. REA said it hasn't approached the company nor had any talks about a bid.
Shares of REA dropped 5.3 per cent in Sydney, the most since December 2022, on Monday amid concerns that it may have to issue stock to fund a deal. Rightmove rose as much as 25 per cent in London, boosting its market value by around £1 billion to £5.4 billion ($7.1 billion).
Any deal would boost the scale of REA, which is the largest player in the Australian online real estate industry and has already expanded into other markets including India. Rightmove has maintained steady revenue growth in recent years, and the UK housing market is expected to pick up as interest rates decline.
REA's disclosure, triggered by media speculation, now forces the company into a decision one way or the other. Under the UK's takeovers code, REA must announce a firm intention on whether to bid by Sept. 30 at 5 p.m. London time.
A combination of the two businesses would provide a significant opportunity to unlock shareholder value, REA said in a statement. REA said it would add investment and innovation to Rightmove following any acquisition. The enlarged group would deliver robust growth with strong margins and significant cash generation, enabling continued capital appreciation and shareholder returns, the Richmond, Victoria-based company said.
The prospective deal is a signal of the primacy of scale in the digital property-broking business. REA has a market value of A$27 billion ($18 billion) and trades at almost twice that of local competitor Domain Holdings Australia Ltd. on a price-to-earnings basis, in large part due to its bigger user base and growth abroad.
Still, investors have become wary of corporate Australia's patchy record realizing real gains from blockbuster overseas M&A. What's more, any deal by REA would require an equity raise of at least A$6.1 billion, or about 23 per cent of its current market capitalization, for it to be accretive, Bloomberg Intelligence analysts have calculated.
Its top valuation supports an equity raise, but there would be execution risk in the deal versus shareholder distributions, the analysts wrote in a note on Monday.
Information
REA Group Ltd. is a leading digital real estate company in Australia, controlled by News Corp. The company has expanded into other markets, including India, and is considering a takeover offer for UK property portal Rightmove Plc.News Corp. is a global media and information services company with a diverse range of assets, including newspapers, magazines, and digital real estate businesses.
Frequently Asked Questions
What is REA Group considering?
REA Group is considering a takeover offer for UK property portal Rightmove Plc.
Why is REA Group interested in Rightmove?
Rightmove has maintained steady revenue growth in recent years, and the UK housing market is expected to pick up as interest rates decline.
What would be the benefits of a deal?
A combination of the two businesses would provide a significant opportunity to unlock shareholder value, and the enlarged group would deliver robust growth with strong margins and significant cash generation.
What are the risks of a deal?
Investors have become wary of corporate Australia's patchy record realizing real gains from blockbuster overseas M&A, and any deal by REA would require an equity raise of at least A$6.1 billion.
What is the timeline for a deal?
REA must announce a firm intention on whether to bid by Sept. 30 at 5 p.m. London time.
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