News Corp-backed real estate group eyes global property push
By Penry Buckley
News Corp-controlled online real estate group REA’s shares have slumped after the group was forced to reveal it was considering a cash and share offer to buy UK counterpart Rightmove.
The realestate.com.au website’s operator, in which News Corp owns a 61.4 per cent stake, paused its shares on the ASX 200 minutes before trading opened on Monday after a report in The Australian Financial Review on Sunday pointed to possible takeover activity by REA.
REA Group chief executive Owen Wilson, who the AFR on Monday revealed had been working with Deutsche Bank on a potential takeover of Rightmove. Credit: REA Group
In a statement to the ASX on Monday, REA’s board announced the possible takeover bid but said it still had “not approached, nor had any discussions with Rightmove, regarding any potential offer”.
Shares in REA dropped more than 7 per cent once trading resumed and were trading at $202.98 in the afternoon session. On London’s FTSE overnight, Rightmove shares jumped 27 per cent on the news.
REA said it believed there were “clear similarities” between the $26.9 billion REA and the FTSE 100-listed Rightmove, which is worth £4.4 billion ($8.5 billion), including leading market positions in the residential property business, continued expansion, and “highly aligned cultural values”.
REA said the potential buyout offered an opportunity to create a “global and diversified digital property company, with number one positions in the UK and Australia”, adding it believed the combined group would make an attractive investment opportunity for REA and Rightmove investors alike.
It said there was “no certainty an offer would be made, nor as to the terms on which any offer would be made”, and advised shareholders they did not need to take any action.
Earlier, the Financial Review’s Street Talk column reported that REA Group chief executive Owen Wilson had been working with Deutsche Bank as advisers on a potential takeover. REA executive manager for investor relations Angus Urquhart told the publication on Sunday he could “categorically confirm” the group was not yet in discussions with Rightmove.
The UK group, which operates the country’s largest online real estate portal, was founded in 2000 and listed on the London Stock Exchange in 2006. Its shares closed up at just over £557.37 on Friday, largely unchanged from where they were this time last year, however its value dropped around 7 per cent in October after JP Morgan advised investors to sell because of heightened competition in the market following the entry of US website CoStar.
Shares in REA Group slumped after it revealed it was considering a bid to buy UK counterpart Rightmove.Credit: Joe Armao
Roy van Keulen, technology analyst at Morningstar, said while he had been critical of REA’s overseas expansion efforts in the past, including recent moves into the emerging Indian market, the potential Rightmove bid was different.
“The UK has high GDP per capita, so there’s monetisation opportunity, and Rightmove is already the number one,” Keulen said.
He said the move also contained a “defensive component” against CoStar’s international expansion.
“If they see CoStar, who’s already the leader in commercial real estate listings and data, if they become a globally relevant player in residential – that’s a long-term issue for REA,” he said.
The potential takeover bid follows a year of strong results for REA Group, which was founded in 1995 and has been majority-owned by News Corp since 2005. The group reported a net profit of $460.5 million this year and revenue growth of 23 per cent, beating competitors Domain (owned by Nine Entertainment, publisher of this masthead), whose revenue grew 13.1 per cent.
Under UK financial law, REA must announce a firm intention to buy Rightmove by 5pm UK time on September 28, four weeks after its original announcement, unless regulatory body The Takeover Panel grants an extension.
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