REA is 61% owned by News Corp, which also owns Dow Jones & Co
Following Rightmove’s rejection of News Corp controlled REA Group’s original $7.32 billion offer, the English-speaking world’s two most popular real estate listing websites will need to be made more appealing if REA Group hopes to combine them.
Analysts have spent days since REA first approached Rightmove and acknowledged its interest in the requirements for this case while most of the takeover offers require a premium to gain the shareholders approval. On Wednesday, REA announced the rejection of the offer by the Rightmove’s board of directors. The board rejected a combination of cash and shares that valued the company at about 5.6 billion pounds.
That would be a 27% premium over Rightmove’s valuation previous to REA’s public interest, and the largest transaction by a Rupert Murdoch-related business in years. It comes at a critical time for the media magnate, who is at odds with his children over the family trust that controls News Corp and Fox Corp., the parent company of Fox News.
It was later confirmed by Rightmove that the proposal offered to them was valued at 698 pence per for each share but the firm had rejected it. They made a statement that the proposal fundamentally undervalued the company and its future prospects and also stated that it was opportunistic.
On Tuesday, shares of Rightmove closed at 670.80 pence and are at 16.5% currently from the past year to the present. The shareholders were bright to notice of not taking any action.
REA is given time until September 30 to make a formal offer to Rightmove or walk away under UK takeover rules.
Activist investors, particularly Starboard Value, have pressured News Corp to divest its digital real estate assets. REA is 61% owned by News Corp, which also owns Dow Jones & Co.
Instead, News Corp looks to be trying to expand its digital real estate sector at a time when central banks are beginning to decrease interest rates, potentially boosting property markets by decreasing borrowing costs. As part of the deal, REA will file for a secondary listing in London.
There is a possibility for REA to return with an improved proposal for Rightmove but the News Corp controlled firm has it made a statement yet. According to some analysts REA would need to offer the shareholders of Rightmove a 40%-50% premium. This in turn would leave some space error to improve earnings through operational improvements.
Analysts warn that the differences between the UK and Australian markets mean there are minimal cost savings to be discovered. REA, which provides mortgage broking and research services in Australia, said on Wednesday that it would assist Rightmove in expanding its services beyond property advertising.
Following the dot-com disaster, News Corp purchased a stake in Australia’s top real-estate platform, which was launched in a garage in 1995. It spent approximately $1.3 million in cash and free advertising for a 44% stake.
Given that REA’s worth was almost $20 billion before its interest in Rightmove was revealed, the transaction has proven to be a wise investment. Although the stock is still up roughly 10% in 2024 and has more than doubled in value since mid-2022, REA shares have decreased by roughly 10% since then.
The elder son of Murdoch, lachlan took over REA in 2001 with a 44% stake for AUD $2M. This inturn increased stakes of News Corp to 655 in just three years after a downfall of a takeover deal in 2005.
At present the company is worth AUD $26B and the overall digital real estate services division of News Corp covers one-third of the total global profits of $1.5B. This also includes the operations that take place in the US.
In October of last year, CoStar, a US property data business, paid £100 million for the UK’s OnTheMarket site as a launchpad for its desire to “participate aggressively” in the European property portal game.
Silver Lake, a US private equity firm, paid £2.2 billion in 2018 for Zoopla, the UK’s second-largest property marketplace and owner of brands such as PrimeLocation.
