Investors didn’t welcome the news on Monday—shock news, actually—that the Murdoch family-controlled REA Group (ASX:REA) was looking to acquire a similar business in the UK.
REA stated that it is considering a cash-and-share offer for Britain’s Rightmove, citing what it called a “transformational opportunity.”
Rightmove is the largest property portal in the UK, similar to REA in Australia. REA said it saw a significant opportunity to create shareholder value by combining the two advertisers, highlighting the potential for strong margins, significant cash generation, and shareholder returns. The company did not provide any financial details.
"REA sees a transformational opportunity to apply its globally leading capabilities and expertise to enhance customer and consumer value across the combined portfolio," REA stated in a market filing.
REA noted that it had not yet engaged in discussions with London-listed Rightmove regarding any offer and that it was not certain of making an offer within the 28-day deadline specified by the UK's takeover code.
REA shares fell more than 5% on Monday as investors digested the surprise announcement.
It’s no wonder—Rightmove had a market value of £4.04 billion at the end of last week, or around $A7.8 billion.
Local analysts believe REA’s bid would have to exceed $A9 billion.
Shares and cash would reduce the cash outlay, but with REA’s ASX value at $A27 billion, the deal could be easily financed.
If the deal goes through, since REA is 61% owned by News Corp, it would effectively mean that News Corp is indirectly buying Rightmove. If it’s a shares and cash offer, would News Corp’s dominant stake be diluted?
REA also owns 20% of Move Inc., with News Corp owning the remaining 80%. Move is a similar business in the US to REA.
