Rightmove refuses to engage with REA’s $12bn takeover plan

The UK’s largest online real estate property portal Rightmove has shrugged off calls from key investors to open talks with REA Group over a $12bn takeover proposal.

Rightmove is the UK’s largest online real estate property portal

British property portal Rightmove has shrugged off calls from key investors to open talks on a near $12bn takeover proposal from Australian property advertising company REA Group.

The British group rejected REA’s twice-sweetened takeover proposal on Wednesday, taking a hard line against the plan, which it described as “unattractive” and said it materially undervalued its operation.

The rejection comes ahead of a month’s-end deadline for REA to either formalise its bid or walk away. If it is able to attract engagement from Rightmove, it may be able to extend the time to make a decision, with the high-stakes battle likely to push up against the deadline.

Rightmove’s rejection comes after two shareholders, GCQ Funds Management and Fairlight Asset Management, urged Rightmove to discuss the bid to try and get REA to again lift its bid.

REA pitched its plan as an opportunity to build a global proptech company and bring its skills in expanding into areas, including financial services, into the British market. However, it has met stiff resistance from Rightmove’s board, despite some investors hoping for a breakthrough.

REA had on Monday lifted its takeover bid for the British property portal for a second time to £6.1bn ($11.95bn). That came after its first sweetened offer worth about £5.9bn was rejected last weekend.

Under the latest deal, Rightmove shareholders would receive 341 pence in cash and 0.0422 new REA shares, giving them a greater portion of a merged company.

News Corporation, publisher of The Australian, has a majority stake in REA, but would be diluted under the scheme to create a larger company.

Rightmove said the latest proposal implied an offer value of 759 pence and noted that since REA had proposed the takeover its share price had fallen by about .12 per cent.

“The board considered the increased proposal, together with its financial advisers, and concluded that the increased proposal continues to be unattractive and materially undervalues the company and its future prospects,” Rightmove said.

The Australian company fired back, citing the lack of engagement from the target company.

REA Group chief executive Owen Wilson

“REA is disappointed by the latest rejection from the board of directors of Rightmove and is frustrated that, save for the rejection of REA’s three previously disclosed proposals, REA has still had no substantive engagement with Rightmove,” it said.

“REA continues to firmly believe that the … proposal represents a highly compelling proposition for Rightmove’s shareholders at a significant premium to relevant trading metrics, providing a combination of immediate value certainty in cash, and at the same time giving Rightmove shareholders the opportunity to benefit from the future value creation of the combined business.”

REA urged Rightmove shareholders to encourage the target’s board to engage in “constructive discussions” with it.

Rightmove is the top British portal but its share price traded in a narrow range ahead of REA’s bid and it appeared to be considering its own plays to boost value.

Merger service CTFN reported Rightmove might have considered merging with German peer Scout24 last year via an all-stock, no-premium merger.

GCQ Funds Management, a top 20 active shareholder in Rightmove, said on Tuesday there were terms on which a business combination with REA would be attractive.

“We believe a business combination struck at around 800 pence per share, in line with Rightmove’s all-time high share price, would provide appropriate recognition of Rightmove’s market position and stand-alone growth prospects. Meanwhile, receiving a substantial proportion of the offer consideration in REA Group scrip will provide ongoing exposure to a combined group positioned for even greater long-term success,” GCQ Funds Management chief investment officer Doug Tynan wrote.