The Australian portal attempting to buy Rightmove would have to increase its bid to more than £7 billion to be successful, according to a City analyst.

Rightmove’s board unanimously rejected a £5.6bn takeover by Australian portal owners REA Group, and REA now has until 30 September to bid again.

The board says the offer was “unsolicited” and far too low, undervaluing the business.

Opportunistic

REA is the largest portal in Australia, and is owned by Rupert Murdoch’s News Corp.

A statement from Rightmove says it received “an unsolicited, non-binding and highly conditional proposal from REA regarding a possible cash and shares offer”.

“The Board carefully considered the proposal, together with its financial advisers, and concluded that it was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects.

Very small premium

The offer amounted to a 27% premium on each share, but this would need to be raised significantly to be accepted by Rightmove, according to Sean Kealy, an analyst at Panmure Liberum (main picture).

He said: “I think Rightmove have done exactly the right thing in rejecting this because it’s a very small premium to a suppressed valuation relative to what I think it’s worth.”

Kealy told the Daily Telegraph a successful deal would require a premium of 60%, which would value Rightmove at roughly £7.1 billion.

Staggering rise

Shares in Rightmove rose by a staggering 27% in a single day after news broke about the possible takeover deal last week, and remain 26% higher than a month ago.

Under the terms of REA’s proposal, Rightmove shareholders would hold approximately 18.6% of the combined group’s shares.