REA Group’s sweetened bid for British property portal Rightmove rejected

Digital property advertising company REA Group has raised its bid for British property portal Rightmove to £5.9bn but has been rejected.

If REA’s move is successful, it will control the largest property portals in both Australia and ­Britain. Picture: iStock

Digital property advertising company REA Group’s raised bid for British property portal Rightmove, worth about £5.9bn ($11.54bn), has been rejected by the target.

The move to knock back the sweetened proposal comes after the target company earlier this month rejected an initial proposal as opportunistic, and comes ahead of the company having to formally lodge a bid or walk away by month end, under British takeover rules.

The Financial Times had reported REA had sweetened its offer to about 750 pence per Rightmove share, putting it ahead of the Friday’s closing price of 674.4 pence per share, in an effort to win over investors.

But Bloomberg reported that Rightmove had rejected the improved takeover offer from REA, on the basis that it undervalued the company. The companies have declined to comment publicly on the latest development.

Rightmove had rejected REA’s initial blended cash and scrip proposal, saying it undervalued its operation and its growth ­prospects.

REA had first made a proposal for Rightmove at about 705p per share, 27 per cent above its price at the time, before the Australian company revealed its intentions.

If REA’s move is ultimately successful, it will control the largest property portals in both Australia and ­Britain.

The combined entity would have an international focus and seek a dual listing on the London Stock Exchange if the plan goes ahead, positioning it as one of leaders in the global prop-tech sector.

While REA declined to comment, local analysts had backed the move ahead of the rejection of the sweetened proposed bid on the basis of the transaction’s financial and strategic merits.

REA is majority-controlled by News Corporation, publisher of The Australian.

Under the terms of REA’s original proposal, Rightmove shareholders would have received 305 pence in cash and 0.0381 new REA shares for each Rightmove share.

REA Group chief executive Owen Wilson

That earlier proposal for Rightmove implied a total offer value of 705 pence for each Rightmove share, valuing the company at about £5.6bn.

REA said earlier this month that its initial terms showed an enterprise value multiple of approximately 20.5 times Rightmove’s earnings before interest, taxes, depreciation, and amortisation, for the 2024 financial year of £272m.

Under the original deal, Rightmove shareholders would have held about 18.6 per cent of the combined group’s issued share capital after the deal, but this would likely have been higher under the latest proposal.

After its proposal became public, REA said that given both companies’ strong growth and high cash generation it expected that the enlarged group would be able to rapidly deliver on its expansionary ambitions, in keeping with its track record.

REA shares closed at $198.99 last Friday ahead of the news of the takeover proposal being ­lifted and then rejected.