Rightmove tumbles as REA Group abandons pursuit
By Michele Maatouk
Date: Monday 30 Sep 2024
(Sharecast News) - Rightmove tumbled on Monday after Rupert Murdoch's Australian property business REA Group said it was abandoning its pursuit of the property portal after a fourth, £6.2m takeover proposal was rejected.
At 1220 BST, Rightmove shares were down 8.3% at 613p.
"REA's approach to Rightmove's board was driven by a clear strategic rationale and the opportunity to create a global and diversified digital property company, with strong margins and significant cash generation, underpinned by number one positions in Australia and the UK," it said.
"REA believes the proposed combination would have provided Rightmove shareholders the opportunity to meaningfully participate in a fast growing, diversified, global leader whilst receiving value certainty in an operating environment challenged by increased market competition."
REA said the share price has lacked any sustained upward momentum for two years despite being supported by its ongoing share buyback programme and the revised strategy announced at last year's capital markets pay.
Chief executive Owen Wilson said: "Against a backdrop of intensifying global competition, we approached Rightmove's board because we strongly believed in the opportunity to create a globally diversified leader in the digital property sector that would benefit both REA and Rightmove shareholders. We were disappointed with the limited engagement from Rightmove that impeded our ability to make a firm offer within the timetable available. They had nothing to lose by engaging with us."
News of the bid withdrawal came after Rightmove said earlier that it was rejecting the offer on the basis that it continued to undervalue the group.
Under the terms of the latest offer, Rightmove shareholders would have received 346p per share in cash and 0.0417 new REA shares - which implied an offer value of 780p - and a dividend of 6p in cash in lieu of any final dividend for 2024.
"The board of Rightmove has fully reviewed the latest proposal with its financial and legal advisers," it said.
The company said it had taken into consideration the views of its shareholders and also considered the representations from the chair and management team of REA.
"The board has concluded that the latest proposal remains unattractive and continues to materially undervalue Rightmove and its future prospects and that the board cannot recommend the latest proposal to Rightmove shareholders."
Under UK takeover rules, REA had until 1700 BST on Monday to either make a firm intention to make an offer for Rightmove or walk away.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "REA Group has given up knocking on the door of Rightmove, after the property portal refused to open up. It decided the offers were too low, given the opportunities for growth ahead. Rightmove's unwillingness to engage with REA Group shows how far away the latest proposal is from what the board would have required to start a due diligence process.
"It's easy to see why REA Group was interested in Rightmove. It runs property websites and indices across Australia, Asia and North America, so getting a dominant foothold in the UK would have been very attractive. Its interest is also likely to have been driven by the significant drop in Rightmove's share price from the peak in December 2021. Some investors are clearly disappointed that REA Group has walked away, with the shares down by around 8% by early afternoon. However, they remain more than 20% higher than before the first bid was tabled, showing a renewed enthusiasm for the company's prospects. There remains a glimmer of hope that perhaps another suitor may step in with a higher offer."
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