REA takes stake in PropertyGuru business in Asia play

Buying into the platform will spur the company’s longer-term ambitions in the region.

REA group CEO Owen Wilson. Picture: David Geraghty.

Digital advertising company REA Group is positioned to grow in Asian markets after striking a deal to combine its Malaysia and Thailand businesses with one-time rival PropertyGuru and take a stake in the enlarged Asian-based property platform.

The deal will see REA swap its exposure to the two emerging markets for an interest in the broader PropertyGuru business, the market leader in South-East Asia that has been touted as a float candidate.

The combination will see REA take an 18 per cent slice in the combined platform that is strongest in Singapore, Vietnam and Malaysia, where the two companies had been competitors.

“We now have a stake in an incredibly strong business with great growth prospects across the region,” REA chief executive Owen Wilson said.

He said the move “presents a unique opportunity to create the most compelling digital property classifieds company in southeast Asia and accelerate the next wave of proptech innovation across the region”.

The deal takes REA from competing with PropertyGuru across much of south east Asia and instead puts them under one roof, with the listed Australian group owning the business alongside two private equity players, KKR and TPG.

Mr Wilson said that PropertyGuru would now have a “strategic shareholder” that would also influence strategy by taking a board seat.

REA will keep its separate businesses in India, where it sees an opportunity to emerge as the top site in a fragmented market, in Hong Kong, and a Chinese language listing service.

Mr Wilson said the tie up made for the most compelling proposition in the region and he called out the scale and growth potential of southeast Asian markets.

“We want to keep growing the business and we’re really excited about that opportunity,” he said.

Longer term the two financial investors may ultimately seek to exit, he said. While options include a float or a US listing via a special purpose company, Mr Wilson said that REA “could be a logical buyer”, but for now the private equity firms had committed to PropertyGuru.

PropertyGuru last October unveiled a $S300 million funding round that was backed by KKR and TPG, after it pulled plans to float on the Australian Securities Exchange in 2019.

PropertyGuru has been expanding in its main market, Singapore, and had also flagged plans in Thailand, Indonesia, Vietnam and Malaysia as activity in Asian real estate markets holds up in the face of the coronavirus pandemic.

In March it was reported that PropertyGuru was considering a US listing through a merger with a special purpose acquisition company that could see it valued at about $US1 billion.

But the REA investment could see it stay private for longer as the operations are pulled together.

Under the deal, REA will transfer its Malaysia and Thailand entities, that operate iProperty.com.my and Brickz.my in Malaysia and thinkofliving.com and Prakard.com in Thailand to PropertyGuru in exchange for an 18 per cent interest in the company. REA will take one board seat.

The move is pitched as a growth play as the combined businesses will have access to a deeper pool of expertise, technology and investment.

The deal is conditional on REA selling its 27 per cent interest in 99 Group, operator of 99.co, iProperty.com.sg and rumah123.com.

In this financial year, the Malaysia and Thailand businesses are expected to contribute about $15m to REA revenue and to reduce earnings before interest, taxes, depreciation, and amortisation by about $11m.

REA shares dipped 90c to $163.58.