Shares in REA Group (ASX:REA) jumped more than 4% yesterday, taking the recovery in the past week to nearly 9% as investors realised the Murdoch-controlled real estate listings platform would not get hold of its UK peer, Rightmove, despite a series of sweetened offers.
A week ago, REA shares bottom out at just over $192 from a recent high of $219 at the end of August, just before reports of the Rightmove interest started leaking into the market.
Rightmove directors ignored the approaches until a fourth offer was made last Friday, at which point the UK company’s chair met REA chair Hamish McLennan and told him "not interested, old chap".
But the shares had started rebounding after Rightmove rejected the third offer made at the start of last week.
REA shares edged up on Monday, but Tuesday surged more than 5% at one stage after the Australian company confirmed the UK adventure had been dropped. The shares ended 4.5% higher.
The recovery in the shares in the past week — and especially yesterday — have made REA shareholders, including News Corp and the Murdochs, more than $2.5 billion better off — or rather it has recovered the value lost for the company’s month-long UK adventure.
In REA’s statement, CEO Owen Wilson said the company had decided to remain “financially disciplined”, and would now focus on “the many other opportunities ahead of us”.
News Corp CEO Robert Thomson said the media group “strongly supports” REA's decision to withdraw. (News owns 61% of REA.)
“We applaud REA’s financial discipline as it is foolhardy to overpay for an asset, even if it patently had positive potential,” he said. “Financial discipline has been at the heart of the transformation of News Corp, and our recent successful acquisitions for Dow Jones and HarperCollins reflect that core principle.”
What it seems is that quite a few non-Murdoch/News related shareholders thought REA wasn’t being “financially disciplined” in the first place in chasing after Rightmove.
The strong market reaction on Tuesday confirms that thinking.
