REA Group raises bid for Rightmove to $11.95bn in chase for British property portal

The latest sweetened proposal is aimed at getting the British target to the table for talks about a potential merger.

REA Group has hiked its takeover offer for British property portal Rightmove for a second time to $11.95bn as it seeks to win engagement from the target company. Picture: Henry Nicholls/AFP

Digital property advertising company REA Group has lifted its takeover bid for British property portal Rightmove for a second time to £6.1bn ($11.95bn) as it seeks to win engagement from the target company.

The move comes after its first sweetened offer worth around £5.9bn was rejected over the weekend and ahead of a deadline for it to formally bid for the British company at month end.

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.

The high stakes battle for Rightmove could propel REA into the top ranks of digital property platforms, as the combined company would hold top positions in both Australian and Britain.

REA chief executive Owen Wilson is pitching the value of bringing the two companies together, which would create a leading platform in global digital property.

“We believe that the combination of our world-leading expertise and technology with the attractive Rightmove business will create an enhanced experience for agents, buyers and sellers of property. We live in a world of intensifying competition and this proposed transaction would bring together two highly complementary digital property businesses for investment and growth,” he said.

Mr Wilson said the latest proposal “provides a combination of immediate value certainty in cash and at the same time gives Rightmove shareholders an increasing opportunity in core digital property and adjacencies where we have much expertise”.

REA Group has hiked its takeover bid for British property portal Rightmove for a second time to $11.95bn. Picture: iStock

After rejecting the first two proposals for the company Rightmove is now weighing its options.

“Based on the implied value and structure of REA’s first and second indicative non-binding proposals, we considered these proposals to be uncertain, highly opportunistic and unattractive. Accordingly, the Board unanimously rejected them,” Rightmove chair Andrew Fisher said.

“The Board will continue to act on behalf of our shareholders and respond to the most recent proposal in due course,” he said.

With the target’s board rejecting REA’s earlier overtures, it is now appealing to investors to apply pressure to treat with the Australian company. “We are genuinely disappointed at the lack of engagement by Rightmove’s board, and we strongly encourage the Rightmove Board to engage,” Mr Wilson said.

Rightmove has characterised REA’s earlier approaches as “wholly opportunistic” But REA pointed to Rightmove’s share price lacking any sustained upward momentum for two years, despite it being supported by a share buyback and new strategy.

REA said its improved proposal implies a total offer value of 770 pence for each Rightmove share and is premised on REA shares being at $198.99. REA shares dropped $4.99 to $194 on Monday.

The Australian company said its latest plan was an increase of 9.2 per cent on its initial proposal for Rightmove at the start of the month. It is also a 39 per cent jump on Rightmove’s share price of 556 pence in August, ahead of REA revealing its intentions towards the company.

If REA is able to engage with Rightmove it may seek to work on obtaining a 28-day extension to work on the proposal. Otherwise, under British takeover rules, it must either lodge a formal bid or walk away by month end.

The latest proposal would see Rightmove shareholders hold approximately 20 per cent of the combined group if a deal got done.

REA said it wanted to give shareholders of both companies the opportunity to air their views on the attractiveness of the bolstered proposal, and to “urge Rightmove shareholders to encourage the board of directors of Rightmove to engage in constructive discussions with REA to work towards a recommended transaction”.

REA said that apart from the rejection of its two earlier proposals, it has had no substantive engagement with Rightmove. “REA remains ready to engage immediately with the board of directors of Rightmove,” it said.

REA said it “firmly believes” the latest proposal represents a “highly compelling” proposition for Rightmove’s shareholders at a “significant premium” to relevant trading metrics. REA pointed to its own track record of creating value for shareholders as it has boosted revenue and earnings over the last decade.

The Australian company said it was a “natural time” for REA to back and speed up Rightmove’s strategic objectives as the British residential market faces heightened competition after US group CoStar bought a rival.

The Australian company believes it can use its smarts to lift the customer and consumer value across the combined companies using its expertise in building up personalised consumer experiences, and expanding in areas like commercial property, in financial services and property data.

The cash component of the boosted proposal is expected to be fully financed through long-term third-party debt and existing resources. But REA expects to be able to keep gearing in check and receive an investment grade rating at completion.

REA said a planned dual listing would also provide an opportunity for a wider pool of investors to gain exposure to a global and diversified digital property company on the London Stock Exchange.