REA Group, a constituent of Rupert Murdoch’s vast business conglomerate and under the control of News Corp, is mulling a potential cash and share deal to acquire UK property platform Rightmove, worth €5.24 billion ($5.8 billion). The proposed deal aims to mould a global digital property firm. However, REA has not yet launched any formal dialogue or made an overture to Rightmove regarding this proposal.
REA’s share price suffered an 8% downturn on the Sydney stock exchange on Monday, marking the steepest daily hit since December 2022. This slide was driven by worries that additional stock might have to be released to facilitate the acquisition. Prior to these events, Rightmove’s share price had declined by 3.5% in 2022 in the London market, resulting in a market capitalisation of £4.38 billion (€5.2 billion).
Rightmove’s enduringly high returns and the anticipated revival of the UK property market as interest rates fall suggest that REA’s largest operation within the online property sector in Australia would receive a boost from this deal. The Australian firm has already established its presence in several other markets, including India.
After rumours in the media, REA was compelled to publicise its intentions regarding the possible acquisition. As determined by UK takeover rules, the Australian firm is obligated to communicate a definitive course of action by 30th September.
In a public statement, REA declared that bringing together the two entities would potentially precipitate significant value creation for its shareholders. Furthermore, it indicated the intention to inject “investment and innovation” into Rightmove if the deal goes ahead. If expanded, REA anticipates the emergent group would offer consistent and robust growth, strong profit margins, and substantial cash flow, thereby promoting ongoing capital growth and returns for shareholders.
This probable acquisition underscores the dominant role of size in the online property brokerage sector. REA, which boasts a market valuation of €16.5 billion (A$27 billion), has a valuation almost twice that of its domestic rival, Domain Holdings Australia Ltd. This premium is largely attributed to its broader user base and overseas growth.
However, investors exhibit increasing caution about the inconsistent record of Australian corporates in realising tangible value from substantial offshore M&A activity. Critics worry that despite its high market valuation, suitable for an equity increase, executing the deal could present a risk when compared to potential returns for shareholders.