Rightmove, the UK’s leading online estate agent, has rejected a £5.6 billion bid by REA Group, labelling it ‘opportunistic.’
- The offer represented a 27% premium on Rightmove’s current market valuation but was deemed to undervalue the company by its board.
- REA Group, controlled by Rupert Murdoch’s News Corp, now has a deadline to either formalise or withdraw the offer.
- The proposed deal included a cash and share component, with Rightmove shareholders poised to own a minority stake in the merged entity.
- Rightmove’s decision comes amid high mortgage rates affecting the UK property market, though an eventual market recovery is anticipated.
REA Group, an Australian real estate conglomerate under the umbrella of Murdoch’s News Corp, extended a significant cash and share proposal to Rightmove, valuing the company at 705p per share. This valuation reflects a generous 27% premium over Rightmove’s existing market position.
Despite the financial allure, Rightmove’s board unanimously turned down the proposal. In a considered statement issued to investors, they articulated their position, describing the bid as wholly opportunistic. The board highlighted their view that the offer fundamentally undervalues Rightmove along with its future prospects.
In accordance with the City takeover regulations, REA Group faces a deadline of 5 pm on 30 September to formalise its offer or opt for withdrawal. The proposal had initially sparked a notable 25% rise in Rightmove’s share price, culminating in a market value of £5.3 billion by the week’s closure.
In their bid, REA Group envisaged a scenario where Rightmove’s shareholders would acquire approximately 18.6% ownership in the combined entity’s share capital. Additionally, shareholders would retain rights to an interim dividend of 3.7 pence per share, with the cash component backed by a mix of third-party debt and existing financial reserves.
REA’s strategy included plans to establish a secondary listing on the London Stock Exchange, aiming to widen their investor appeal through a global, diversified digital property platform. This comes during a challenging phase in the UK property market, characterised by elevated mortgage rates which have tempered buyer interest. Despite present challenges, market activities are predicted to gain momentum as interest rates decrease.
This proposed merger aligns with a broader strategy by the Murdoch family to diversify their interests beyond traditional media avenues. Rupert Murdoch, at 93, is in the midst of transitioning leadership to his eldest son, Lachlan, amidst familial tensions regarding control of the family trust. This aspect underscores a pivotal shift in the strategic direction of their business interests.
The rejection of REA Group’s bid underscores Rightmove’s confidence in its market valuation and future prospects, amidst a wider strategic shift within the Murdoch empire.
