‘Disappointed’ REA Group boss ends bid to buy Rightmove

Australian property portal giant the REA Group has withdrawn from its attempt to buy Rightmove.

The firm, which over the past week or more had made four offers to the Rightmove board to buy its entire capital via a cash and shares offer, has said it no longer intends to make an offer, hinting strongly that a hostile takeover is unlikely.

Nevertheless, REA Group has let rip some parting shots following Rightmove’s repeated and firm rejections of its overtures, saying its overtures were driven by a clear strategic rationale and the opportunity to create a “global and diversified digital property company, with strong margins and significant cash generation, underpinned by number one positions in Australia and the UK”.

It goes on to says that: “REA believes the proposed combination would have provided Rightmove shareholders the opportunity to meaningfully participate in a fast growing, diversified, global leader whilst receiving value certainty in an operating environment challenged by increased market competition.”

REA Group has also taken a pot shot at Rightmove’s performance for its shareholders, saying its share price has “lacked any sustained upward momentum for two years despite being supported by its ongoing share buyback programme and revised strategy announced at last year’s Capital Markets Day.

It also points out the REA Group’s fourth proposal represented a 45% premium to Rightmove’s 12-month and 24-month volume weighted average share prices.

Rightmove acquiescence

Nevertheless, REA Group admits that without Rightmove’s acquiescence, an acquisition would never be at a “fair price” which suggests a it would have had to over-pay for the portal’s stock to persuade shareholders to switch sides.

“Against a backdrop of intensifying global competition, we approached Rightmove’s Board because we strongly believed in the opportunity to create a globally diversified leader in the digital property sector that would benefit both REA and Rightmove shareholders.,” says Owen Wilson, CEO of REA (main image)

“We were disappointed with the limited engagement from Rightmove that impeded our ability to make a firm offer within the timetable available. They had nothing to lose by engaging with us.

“We are always financially disciplined when we look at M&A and reinvestment in our business and will continue to focus on the many other opportunities ahead of us.”

The failed attempt by REA Group has attracted the attention of City investment banking giant Panmure Liberium, which says its failed acquisition proves Rightmove is under-valued as a business by its share price and should be a warning to CoStar, the US property giant which recently bought OnTheMarket.

CoStar consequences

Panmure Liberum analyst Sean Kealy says: “We see this saga as underscoring the valuation gap that had opened up in the shares following CoStar’s acquisition of OnTheMarket.

“CoStar’s OnTheMarket will likely not be able to displace Rightmove in the UK – while we expect it can sign up agents and ultimately take share from Zoopla, convincing those agents to leave Rightmove is a taller task.”