SYDNEY (Reuters) – On Wednesday, Australian property platform REA Group revealed that its $7.32 billion cash-and-stock acquisition proposal was turned down by the UK’s largest property listing site, Rightmove.
REA Group, majority-owned by Rupert Murdoch’s News Corp (holding a 62% stake), did not provide specific reasons for Rightmove’s rejection of the offer.
Following the news, REA shares saw a 1.25% drop during early Wednesday trading. Rightmove has yet to issue a response to Reuters’ inquiry, which was sent outside standard UK working hours.
According to Jefferies analysts, the UK housing market is three times larger than that of Australia. A merger would have significantly accelerated REA’s expansion into global markets, particularly in the UK.
REA’s proposal included a 705-pence-per-share offer for Rightmove, a 27% premium over Rightmove’s closing price of 556 pence on August 30, when discussions were confirmed. The deal included 305 pence in cash per share along with 0.0381 new REA shares. However, the offer remained non-binding and was subject to due diligence.
Had the acquisition gone through, Rightmove shareholders would have held an 18.6% stake in the newly formed entity. REA also noted that the cash portion of the deal was to be financed through a combination of debt and available cash reserves.
Analysts estimated that REA would need to issue around 30 million new shares to cover the stock portion of the transaction, which might have reduced News Corp’s ownership of REA to approximately 50%.
According to E&P analyst Entcho Raykovski, REA could choose to bypass Rightmove’s board and appeal directly to shareholders if it continues to pursue the deal. Raykovski also suggested that REA might consider increasing the cash portion of its offer, though that could require raising additional capital.
“We see potential in the merger but wouldn’t want REA to raise the bid to a point where the financial outlook becomes less favorable,” Raykovski said.
Regardless of the outcome, REA stated its intention to seek a secondary listing in London to broaden its investor base.
(Conversion: $1 = 0.7645 pounds)
