Rightmove rejects £6bn takeover offer

The directors of Rightmove have rejected an improved takeover offer from an Australian rival valuing the online property portal at £6 billion.
The FTSE 100 company said the offer from REA Group had valued its shares at 759p each and that the deal “materially undervalues” the business. Its suitor had increased its proposed offer for a third time, made up of 341p in cash and 0.0422 new REA shares.
“The board considered the increased proposal together with its financial advisers and concluded that the increased proposal continues to be unattractive and materially undervalues the company and its future prospects,” Rightmove said. “Accordingly, the board unanimously rejected the increased proposal.”
The company has an 86 per cent share of the house search market in the UK and enjoys high profit margins. For every £1 spent by estate agents and developers with Rightmove, it made 69p of profit in the first half. About 19,000 estate agents and developers advertise on the portal.
Rightmove said that a fall in REA’s own share price meant that at Tuesday night’s close the offer now valued the British business at 759p a share. This compared with a value of 770p when the third offer was made. Shares in Rightmove were down by 12½p, or 1.9 per cent, at 670½p in afternoon trading.
Its shares have been under pressure in recent years amid concerns about increased competition in the domestic market from CoStar, the American property market powerhouse, which has bought OnTheMarket, a rival platform. The board of Rightmove has outlined plans to expand its business by moving into new product lines, such as commercial property and mortgage broking.
REA group, which is 61 per cent-owned by News Corp, the publisher of The Times, said it was “disappointed by the latest rejection from the board of directors of Rightmove and is frustrated that, save for the rejection of REA’s three previously disclosed proposals, REA has still had no substantive engagement with Rightmove”.
The Melbourne-based company said it continued to believe that its sweetened indicative offer “represents a highly compelling proposition for Rightmove’s shareholders at a significant premium”. It urged Rightmove shareholders to “encourage Rightmove’s board to engage in constructive discussions with Rea to work towards a recommended transaction”.
REA, which was founded in 1995 and has a market capitalisation of A$25.5 billion (£13 billion), has until September 30 to make a firm offer or walk away, under Takeover Panel rules.
Sean Kealy, an analyst at Panmure Liberum, a broker, said that REA was likely to start approaching Rightmove’s shareholders to seek their views on a possible combination. He said it may not be able to increase its offer again as this would place “a significant burden on the business. We note the toughening of language in the third offer, as well as REA’s publication of a supplementary presentation detailing the offer. We expect that it will likely choose to approach shareholders over the Rightmove board at this stage, if it hasn’t already.”
REA Group is listed on the Australian stock exchange, but it has said that it would seek a secondary listing in London if the deal were to go ahead. On Monday it said its approach had not been “opportunistic” because Rightmove’s share price had “lacked any sustain upward momentum for two years”, despite the company launching a share buyback programme and a new push into non-core business areas.