Rightmove rejects ‘opportunistic’ £5.6bn takeover bid

Rightmove has rejected a £5.6bn takeover bid from REA Group, dismissing the offer as too low and “totally opportunistic”.

Britain’s largest property listings website confirmed it had received a cash-and-shares offer valuing its shares at 705 pence each, a 27 per cent premium to their price on August 30.

But Rightmove said changes in REA’s share price meant the offer reflected a value of 698p per Rightmove share, or a 26 per cent premium.

REA is an online real estate advertising company based in Melbourne, Australia, whose largest shareholder is Rupert Murdoch’s News Corporation.

The company’s offer for Rightmove includes 305 pence per share in cash, to be partly funded by debt, and around 0.04 new REA shares for each Rightmove ordinary share.

It believes that such an acquisition would benefit shareholders by creating a business “with strong margins and significant cash generation” that occupies the number one position in both the United Kingdom and Australia.

REA also said it would “improve the UK property experience for buyers, sellers and tenants, positively contributing to the property market ecosystem.”

If the proposal is successful, Rightmove investors would own around 18.6 per cent of the enlarged business.

But after assessing the deal, Rightmove’s board unanimously rejected it on Tuesday after determining it was “wholly opportunistic and fundamentally undervalued Rightmove and its future prospects”.

The FTSE 100 group said its announcement today was made without REA’s approval or agreement and there was “no certainty” another offer would be made.

Under city procurement rules, REA has until 5 p.m. on Sept. 30 to declare a firm intention to make another offer or withdraw.

Rightmove has demonstrated resilience over the past two years amid subdued property market conditions caused by rising interest rates and cost of living pressures.

Its turnover rose 10 per cent to £364.3m last year thanks to price increases and stronger demand for its bundles and digital products, while operating profit rose 7 per cent to £258m.

Revenue and earnings continued to grow in the first half of 2024, with the former up 7 percent to £192.1 million.

However, Rightmove shares have fallen since hitting a peak of almost 8 pounds in December 2021. They were up 0.5 per cent at 674.4 pence in early trading on Wednesday.

Susannah Streeter, director of money and markets at Hargreaves Lansdown, said REA’s acquisition of Rightmove was likely partly motivated by its falling share price.

He added: “Another higher offer from REA Group cannot be ruled out, and this may have already opened a stream of other interest, with private equity firms potentially being first in line.”