Australian property listing firm REA Group recently made a cash-and-stock takeover offer to Britain’s largest real estate portal Rightmove. The offer, amounting to 5.6 billion pounds ($7.32 billion), was aimed at expanding REA’s presence in the lucrative international markets, particularly in the significantly larger British housing market.
Despite the substantial premium of 27% offered by REA, Rightmove turned down the proposal without providing any specific reasons. This rejection has led to a decline in REA’s shares by 1.25% in early trade. The deal, if successful, would have resulted in Rightmove shareholders owning around 18.6% of the combined entity.
Industry analysts have suggested that REA might need to consider alternative strategies moving forward. One option could be to directly approach Rightmove shareholders with the offer, bypassing the board’s decision. Another approach could involve enhancing the cash component of the deal, potentially requiring a capital raising.
While there is merit in pursuing the deal, stakeholders are wary of any significant increase in the offer price that might compromise the financial viability of the transaction. The issuance of approximately 30 million new shares for the stock portion of the deal could also impact News Corp’s majority holding in REA, potentially reducing it to around 50%.
In light of Rightmove’s rejection, REA has expressed its intention to seek a secondary listing in London, irrespective of the deal outcome. This strategic move is aimed at broadening REA’s investor base and enhancing its access to capital markets globally.
The rejected takeover offer highlights the challenges faced by REA in its pursuit of international expansion through strategic acquisitions. While the deal with Rightmove would have been transformative for REA’s business, the rejection underscores the importance of agile decision-making and adaptability in navigating complex cross-border transactions. As REA evaluates its next steps, the company must carefully balance its growth aspirations with the expectations of its shareholders and the broader market dynamics.