In a sign UK companies are in a mood to see off overseas predators, Rightmove (RMV) has successfully batted off interest from Rupert Murdoch-backed rival REA Group (REA:ASX).
The latter says it will no longer pursue the online UK property portal after having its fourth offer rejected.
Rightmove shares reacted negatively to the news on the day (30 September), falling 8% to 613p, though year-to-date the shares are up 10%.
Sean Kealy analyst at Panmure Liberum says REA chose to walk away from making a higher offer for Rightmove as it ‘would have proven EPS (earnings per share) dilutive for the group.
‘REA Group initially chose to exploit a valuation gap that had become ever greater as the underlying business continued to grow circa 8% year-on-year, but the rating continued to compress.’
Kealy reiterates that REA’s offers were ‘opportunistic’ and expresses full confidence in Rightmove: ‘It will repel US real estate giant CoStar’s (CSGP:NYSE) competitive threat and the company remains cheap relative to both peers and history.’
CoStar acuqired Rightmove’s peer OnTheMarket in 2023. There have recently been signs of life in the UK property market which should provide a helpful backcloth to Rightmove.
REA’s CEO Owen Wilson expressed disappointment with Rightmove’s rejection of its fourth proposal saying in the company was disappointed with ‘the limited engagement from Rightmove that impeded our ability to make a firm offer within the timetable available.’
Wilson added: ‘They [Rightmove] had nothing to lose by engaging with us.’
Rightmove’s rebuttal hasn’t discouraged REA Group from looking at other opportunities in the digital property sector and adjacent markets, including India, the company said.
Under the terms of REA’s latest offer, Rightmove shareholders would receive 346p in cash and 0.0417 new REA shares, implying a value of 780p based on the closing price of REA Group on the Australian market, as well as 6p per share in cash in lieu of a final dividend for 2024.
The Rightmove board unanimously rejected the proposal saying it still ‘materially undervalued’ the business and its future prospects.
Rightmove chair Andrew Fisher said: ‘We respect REA and the success they have achieved in their domestic market. However, we remain confident in the standalone future of Rightmove.
‘Rightmove has been the leading operator in the UK for over 20 years, and it has differentiated market presence, branding and technology, and very significant opportunities for future growth.’
Fisher added that ‘the last few weeks have been very disruptive, as well as unsettling for our colleagues’.
Under the UK Takeover Code, the Australian property group cannot make any further bid for Rightmove for at least six months – but this doesn’t stop other interested parties approaching the company.
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