REA, which is 62% owned by Rupert Murdoch’s News Corp did not cite any reason for the offer’s rejection by Rightmove
Australian property listing firm REA Group said on Wednesday that Britain’s biggest real estate portal Rightmove had rejected its £5.6 billion ($7.32 billion) cash-and-stock takeover offer.
REA, which is 62% owned by Rupert Murdoch’s News Corp did not cite any reason for the offer’s rejection by Rightmove.
REA shares declined 1.25% in early trade on Wednesday.
Britain’s housing market is considered triple the size of Australia’s, as per Jefferies analysts, and a deal would have allowed REA to expedite growth in lucrative global markets.
The Australian firm had offered to pay a total of 705 pence per Rightmove share, representing a premium of 27% to the British firm’s closing price of 556 pence on August 30, after which REA confirmed discussions.
The offer consisted of 305 pence in cash and 0.0381 new REA shares and was non-binding and subject to due diligence.
REA said had a deal been completed, Rightmove shareholders would have owned around 18.6% of the combined group.
The cash component of the deal was due to be funded by debt and existing cash, it said.
Analysts estimated REA would need to issue nearly 30 million new shares for the stock portion of the deal, which could lower News Corp’s holding down to around 50% of REA.
If it wants to continue to pursue the deal, REA’s options now are to present the offer directly to Rightmove shareholders without board endorsement, according to E&P analyst Entcho Raykovski.
REA could sweeten the deal by increasing the cash component, though that could require a capital raising, he added.
We see merit in the deal but wouldn’t want to see REA increase the price to a level where the financial metrics are no longer attractive, he said.
